Apple (AAPL +0.91%) is the largest company in the world today with a $2.9 trillion market capitalization. Its stock went public in 1980, and it has since delivered a whopping return of 183,300% for investors.
In dollar terms, an investment of $1,000 in Apple stock at its IPO would be worth over $1.8 million today! But it wasn't the first stock to have changed investors' lives over the long term, and it certainly won't be the last. So where will the next generation of market leaders come from?
Companies developing electric vehicles (EVs), artificial intelligence (AI), and cybersecurity could be the best candidates. With that in mind, here are four stocks that fit the bill, and they could soar to become among the world's most valuable by 2040.
1. Tesla
EVs are at the core of Tesla's (TSLA -0.75%) business; they account for the overwhelming majority of its revenue, and the company leads the industry in production and sales. It expects to produce 1.8 million cars in 2023, and CEO Elon Musk estimates that number could top 20 million by 2030.
NASDAQ: TSLA
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But EVs are also at the heart of what could be Tesla's most valuable long-term opportunity: its fully autonomous self-driving software. It is currently in live beta mode and has tested it over 150 million miles of road in the real world, with Elon Musk predicting it could be released publicly this year. By installing the software, a Tesla owner will be able to enroll a car as an autonomous robo-taxi within a ride-hailing network, where it will earn money during the hours it's not required for personal use.
An estimate by Cathie Wood's Ark Investment thinks this could be a $4 trillion revenue opportunity by 2027, and it forms the basis of the firm's prediction that Tesla stock could soar almost 10-fold to $2,000 by then. Since competition is ramping up in the EV space, Tesla's leadership position in self-driving software could insulate it from an inevitable slowdown in sales over the long term, which is an attribute few other car companies will be able to match.
Tesla is valued at $681 billion today, so if Ark's prediction comes true, the company will easily be one of the most valuable in the world by 2027, let alone 2040.
2. Palo Alto Networks
Cybersecurity is quickly becoming one of the most crucial industries in the world. A broad range of estimates place the value of the sector's opportunity in the trillions of dollars; one calculation by research firm McKinsey & Company suggests organizations are already underinvested in cybersecurity by about $1.8 trillion. Palo Alto Networks (PANW -3.42%) is the world's most valuable cybersecurity company today with a market capitalization of $70 billion.
The company claims to use AI to a greater extent than any of its competitors, and perhaps that's true given that it has the most comprehensive portfolio of cybersecurity products. It's working to embed AI into its three core segments: cloud security, network security, and security operations.
NASDAQ: PANW
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Palo Alto's AI models already block 8.6 billion attacks on behalf of customers each day, the company says, which is a culmination of the learning achieved by ingesting 750 million data points every 24 hours. According to a survey conducted by global consulting firm PwC, one-quarter of top corporate executives think their businesses will be either highly or extremely vulnerable to cyber risks over the next five years. New advancements in AI could help plug complex vulnerabilities to give those CEOs more confidence, and that alone could usher in a new era of cybersecurity investment.
Palo Alto stock just earned a place in the S&P 500 index, which validates its incredible rise to the top of its field over the last few years. Based on the growing need for cybersecurity, spending should easily run into the trillions of dollars by 2040, and this company is well-positioned to remain at the front of the pack.
3. Nvidia
Since hitting a 52-week low of $108 just eight months ago, shares of Nvidia (NVDA -0.74%) have surged 262%. The company's dominant leadership position in the artificial intelligence space is at the core of that move, and it's really starting to transform its financial results.
Nvidia is a semiconductor company, and it makes the most powerful data-center chips in the industry for training AI models like OpenAI's ChatGPT. It has a whopping 90% market share in that specific segment, and the company recently said there's $1 trillion worth of data center infrastructure that needs upgrading to support accelerated computing and AI. That's a seismic opportunity for Nvidia to have almost entirely to itself (for now).
NASDAQ: NVDA
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In its recent financial report for the fiscal 2024 first quarter (ended April 30), Nvidia not only crushed Wall Street's expectations on the top and bottom lines, but it also issued revised revenue guidance for the second quarter that was $4 billion higher than any prior estimates. But here's the kicker: This wave of AI-driven value creation might just be getting started.
Ark Investment Management thinks the technology will create $90 trillion in enterprise value by 2030, and add $200 trillion to global economic output thanks to immense gains in productivity. Nvidia is already the sixth-largest company in the world, and that could be the floor because the sky's the limit when it comes to 2040.
4. Amazon
Amazon (AMZN +1.42%) is the undisputed global leader in e-commerce and cloud computing services, but it also has a formidable presence in other industries like robotics, digital advertising, and -- of course -- artificial intelligence. Amazon is worth $1.2 trillion today, which makes it the fifth-largest company in the world, and I'm suggesting it will at least hold that position thanks to its operational diversity.
The company generated $220 billion in online sales in 2022, but a peek behind the curtain of that operation reveals an even more exciting opportunity. It has over 520,000 autonomous robots zipping around its fulfillment centers, and thanks to technological advances, they are now 2.5 times more efficient than human workers at picking and packing products. Amazon doesn't sell its robots to third parties yet, but it's worthwhile noting that the industry could be worth $9 trillion by 2030 (according to Ark Invest).
Amazon Web Services (AWS) is the company's cloud segment, and it's the point of focus for investors because it's the primary source of the company's overall profitability. AWS offers a broader portfolio of solutions and generates more revenue than any of its competitors. Plus, it's one of Nvidia's oldest data-center customers, and it's rapidly becoming a key distributor of AI.
AWS is set to launch its new EC2 P5 cloud instances, which will enable customers to seamlessly scale from 10,000 GPU chips to 20,000. The supercomputer-like performance will help them train larger language models than ever before, in addition to AI applications in general.
I think Amazon has a clear pathway to a $5 trillion valuation over the next 10 years, which should solidify its place as one of the world's largest companies by 2040.
