Over the past two centuries, there has been a constant changing of the guard among the world's most valuable companies. In 1901, steel was the key driver of value in the stock market, with United States Steel becoming the first-ever company to surpass a $1 billion valuation.
But by the end of the century, in 1995, General Electric had formed a dominant conglomerate that amassed a market capitalization of $100 billion. It was the first company to achieve that milestone, and it got there by operating in areas like energy, aviation, white goods, and financial services.
Technology is the leading stock market force today, and the numbers have never been larger. After becoming the first company to ever reach a $1 trillion valuation in 2018, Apple (AAPL 0.45%) is now worth $2.5 trillion. And it's joined in that exclusive club by just one other company -- its tech sector rival, Microsoft (MSFT 0.64%), which is worth a shade over $2 trillion.
But a very small list of high-quality companies might have the potential to join them. I'm going to share two of those candidates; one is relatively close already, while the other could deliver monster gains for investors if it gets there.
1. Alphabet (Google)
Alphabet (GOOGL 0.73%) (GOOG 0.71%) is the parent company of prominent technology brands like Google and YouTube, which are responsible for driving the organization to a $1.3 trillion valuation as of this writing.
Google owns the world's leading internet search engine, and it's also home to one of the largest cloud-services providers, Google Cloud. But its next frontier is artificial intelligence (AI), which could completely transform both of those industries in the long term, and it's the primary reason I think Alphabet could soon join Apple and Microsoft with a $2 trillion valuation.
Right now, Google Search serves up links to relevant websites or applications based on the terms a user inputs. But AI-powered chatbots could become the dominant method for seeking information online, and on March 21, Google rolled out a beta version of its Bard platform to users across America and the United Kingdom. It's expected to compete with OpenAI's ChatGPT, which wowed the tech world this year with its ability to deliver detailed answers to complex questions across a broad spectrum of topics.
Microsoft now owns a substantial stake in OpenAI, and it has already integrated ChatGPT into its Bing search engine, which has concerned Alphabet investors. However, Google has a 93% market share in the search industry compared to Bing's 3%, so it retains a substantial advantage. But how big could the AI opportunity be?
According to one estimate by Cathie Wood's Ark Investment Management, generative AI models (like Bard and ChatGPT) could be responsible for $14 trillion in revenue by 2030; considering Google Search brought in $162 billion in 2022, that's a massive opportunity to grow into. Such models could also add $200 trillion to global economic output by improving worker productivity thanks to the ability of AI to write computer code, for example.
Plus, Google could capture more of that market through its cloud services, where it already offers business customers access to advanced AI and machine-learning tools to supercharge their operations. Ultimately, AI is Alphabet's greatest opportunity perhaps in the company's history, and it's well positioned to take a leadership role, which would create substantial value for investors.
Like Google, Tesla (TSLA 5.69%) also operates in a league of its own despite growing competition. It's the world's largest producer of electric vehicles (EVs), and since the company is valued at $614 billion as of this writing, its stock could deliver a whopping 225% gain for investors if it does reach the $2 trillion mark.
Last year, Tesla delivered 1.3 million cars to its customers, and it could produce as many as 1.8 million in 2023. Thanks to its two brand new gigafactories in Berlin and Texas, the company's annual production capacity is set to ramp up to about 2 million vehicles. But it certainly won't stop there. Tesla just announced plans to build a new facility in Mexico, and by 2030, CEO Elon Musk believes the company could be operating as many as 12 factories producing 20 million cars per year.
Tesla's U.S. market share in the electric vehicle industry is roughly 65%, and while that's slowly declining as more competition comes online, the size of the opportunity continues to soar. Ark Investment Management predicts global electric vehicle sales could grow from 7.8 million units in 2022 to 60 million as soon as 2027, driven by cost declines as the technology becomes more accessible. Tesla could end up with a smaller piece of a substantially larger pie over time.
But that's not all. Tesla is also a powerful force in artificial intelligence through its autonomous self-driving software. It's not only a value-add to its existing fleet of consumer-owned vehicles, but it also paves the way for the company to own significant market share in the autonomous robotaxi industry. While that's still in its infancy (to say the least), Tesla intends to release its first model in 2024, and the industry could present a $14 trillion opportunity over the next four years, according to Ark Invest.
Wall Street analysts expect Tesla to pull in $103 billion in revenue in 2023. That would be a 51-fold increase from the $2 billion it generated a decade ago, in 2013. Considering the substantial opportunities the company faces over the next five-to-10 years, membership in the $2 trillion club is certainly in the cards.