The American economy has produced the world's largest companies for more than a century. But the biggest value creators have come from different industries as society's needs evolved:
- In 1901, United States Steel became the world's first $1 billion company.
- By 1955, motor vehicles were revolutionizing the economy, and General Motors became the first $10 billion organization on Earth.
- In 1995, industrial conglomerate General Electric rode its portfolio of businesses -- from aircraft engines to household appliances -- to a world-first $100 billion market capitalization.
- But by 2018, the technology sector reigned supreme, and Apple became the world's only $1 trillion company.
Apple is still the largest company today, having just crossed a $3 trillion valuation. But since 2018, Microsoft, Amazon, Nvidia, and Google parent Alphabet have all joined the iPhone maker in the $1 trillion club.
The technology sector will likely continue dominating the U.S. economy in the foreseeable future, especially as new industries like artificial intelligence (AI) emerge to transform the way organizations do business. With that in mind, I think two more companies could potentially join the $1 trillion club, and if they do, their respective stocks could deliver astronomical gains for investors.
Image source: Getty Images.
1. Advanced Micro Devices: Potential upside of 449%
Advanced Micro Devices (AMD 2.37%) is a leading producer of semiconductors, including the chips that power some of the most popular consumer products. You'll find AMD hardware in gaming consoles like Microsoft's Xbox Series X|S and Sony's PlayStation 5, as well as the infotainment centers inside Tesla's electric vehicles.
But AMD is also a leading producer of data center chips, and it's currently breaking new ground with the release of its MI300 platform designed for AI workloads. Its competitor, Nvidia, has a 90% market share in this segment of the industry. That company's CEO, Jensen Huang, says there's $1 trillion worth of existing data center infrastructure that needs upgrading to support accelerated computing and AI.
That said, AMD's MI300 has the potential to make a serious dent in Nvidia's dominance. The MI300A is a first-of-its-kind advanced processing unit (APU) that combines processing (CPU) and graphics (GPU) hardware, and it also comes as a stand-alone GPU called the MI300X, which is designed to compete with Nvidia's leading H100 chip.
MI300 hardware won't be released until later this year, but it's already the chip of choice for the new El Capitan supercomputer at the Lawrence Livermore National Laboratory, which will be the fastest in the world when it comes online. Plus, AMD might be about to win over one of the world's largest cloud providers, which could really boost its market share.
AMD is currently valued at $182 billion, so if its market cap does eventually reach $1 trillion, shareholders stand to gain a 449% return -- and here's how it can get there.
The company generated $23.6 billion in revenue in 2022, so its stock trades at a price to sales (P/S) ratio of 7.7. Assuming that figure remains constant, AMD's revenue would have to grow to $130 billion per year to justify a $1 trillion valuation. Mathematically speaking, it could get there within the next decade if its revenue grows by just 18.6% annually between 2023 and 2033.
Considering it has grown by 35% over the last five years, AMD has a great shot to pull it off. Plus, AI hardware presents the largest financial opportunity in the chip industry's history, so there is even a possibility AMD's revenue growth accelerates in the coming years.
2. Uber Technologies: Potential upside of 1,062%
Uber Technologies (UBER -0.38%) is the world's leading ride-hailing platform, with food delivery and commercial freight becoming meaningful contributors to the company's financial results over the last few years. Most platform technology companies are capital-light, which means they operate on a high gross profit margin. But Uber has one major expense it can't escape: the 5.7 million drivers working within its ecosystem.
That's why the adoption of autonomous self-driving vehicles could transform the company's economics, and that revolution might be right around the corner. Last year, Uber signed a deal with Motional, which is a joint venture between Korean carmaker Hyundai and mobility technology company Aptiv. Motional has installed autonomous capabilities into Hyundai's Ioniq 5 electric vehicle, and it's capable of navigating and driving entirely unassisted by humans.
Uber brings its platform and its 130 million monthly customers to the table, so together with Motional, it's helping to create the world's largest autonomous ride-hailing network.
While self-driving cars are being tested on the road now, it's not unrealistic to expect them to roll out more broadly very soon; Tesla CEO Elon Musk expects his company's software to be ready for public release by the end of 2023, and he's also eyeing autonomous ride-sharing as a potential source of revenue. Ark Investment Management, which is run by tech investor Cathie Wood, thinks this new industry could generate $4 trillion in revenue in the next five years.
Based on Uber's 2022 revenue of $31.8 billion and its current market cap of $86 billion, its stock trades at a P/S ratio of 2.7. But it has traded as high as 8.9 in the past, so if we use the midpoint of those two numbers (5.8), Uber will have to generate $172 billion in revenue per year to justify a $1 trillion valuation.
It could get there within the next decade if it can grow its revenue by 18.4% annually between 2023 and 2033. Since Uber has grown its revenue by 32.2% annually over the last five years, even in the face of the pandemic and a tough economic climate, it's definitely capable of hitting the mark.Plus, if Ark Invest's future revenue estimate for the ride-hailing industry proves accurate, and Uber maintains its current 37% global market share, it could earn a whopping $1.4 trillion in revenue from the widespread adoption of autonomous vehicles.
Over the long term, Uber looks likely to join Apple, Microsoft, Nvidia, Amazon, and Alphabet in the $1 trillion club. And if it does, investors who buy Uber stock today could see a whopping gain of 1,062%.
