At the beginning of 2000, the biggest company in the world had a market cap of a little over $600 billion. Ten years later, the market cap for the No. 1 company had fallen to under $350 million. By mid-2018, the first company surpassed the $1 trillion threshold.
This brief history gives you some context for how we got to where we are today in the stock market. It also puts into perspective a prediction I'm about to make: I think the following three tech stocks will be worth more than $3 trillion by 2030.
1. Apple
Apple (AAPL -0.49%) is the easiest pick. Its market cap already tops $2.6 trillion. The stock would only need to rise by an average of around 1.75% each year to finish above $3 trillion by the end of 2030.
I think Apple will deliver significantly greater gains over the next several years. The most important reason why is, unsurprisingly, the strength of the company's iPhone ecosystem. Even modest growth in sales and profits derived from the annual upgrade cycle could propel Apple to the $3 trillion mark.
But my take is that Apple will vault much higher than that because of its innovation. Sure, the company has lagged behind rivals in some areas in the past. However, I look for augmented reality and new iPhone features including folding phones to boost sales considerably in the not-too-distant future.
I also view Apple's introduction of new high-interest savings accounts as a brilliant move. The company is positioning itself to be a much bigger player in fintech. Could Apple even hit $5 trillion by 2030? It's quite possible.
2. Microsoft
Microsoft (MSFT -0.14%) was the company mentioned earlier with a market cap of around $600 billion in early 2000. Although the tech giant went into a major slump that lasted for years, it eventually became a huge comeback story. Today, Microsoft's market cap is more than $2.1 trillion.
To get to $3 trillion by 2030, Microsoft will need to deliver average annual returns in the ballpark of 5%. I think we're already seeing how the company will beat that level -- by integrating AI throughout its products and services.
I suspect that incorporating OpenAI's GPT-4 into its productivity and software development tools will provide a major boost for Microsoft. It should also help the company gain market share for its Azure cloud services.
Investors shouldn't overlook Microsoft's efforts in gaming and promising technologies such as quantum computing, either. There aren't many hot growth areas where the company isn't a major player.
3. Alphabet
I'll readily admit that Alphabet (GOOG -0.06%) (GOOGL) looks like more of a longshot to hit the $3 trillion mark by 2030. For one thing, the company's current market cap of $1.35 trillion is less than halfway to that threshold. Alphabet's shares would need to gain more than 11% on average per year to make it happen. That's not an easy task for an already huge company.
Complicating matters is the possibility that there are rumors that Samsung could ditch Google as the default search engine on its smartphones. I'm not convinced this would hurt Alphabet as much as some think it could even if it happens. However, it does underscore the broader anxiety that Microsoft's AI focus could negatively impact Alphabet's growth.
Don't let the noise distract you from Alphabet's own AI expertise, though. The company has been a leader in AI for years. It appears to be taking the gloves off by combining Google Brain and DeepMind, two AI powerhouses that have operated independently in the past.
Alphabet has multiple growth drivers that could potentially get it to $3 trillion or more over the next few years. Google Cloud and Waymo (the company's self-driving car business) especially stand out. Alphabet is also pioneering new developments in quantum computing, which I view as the most overlooked reason to consider buying the stock.
Importantly, Alphabet is the most attractively valued of all three of these stocks. If the narrative about Alphabet changes (which I think could easily happen), that valuation gap could dwindle and push the stock much higher.
