Joining the $1 trillion valuation club is a feat that few companies have achieved. Right now, there are only six businesses globally worth that much. They are:
- Apple
- Microsoft
- Saudi Aramco
- Alphabet
- Amazon
- Nvidia
This exclusive group has done an excellent job of establishing their products and services worldwide. But which stocks are slated to join this group within the next decade? Let's find out.
Fewer than 100 companies could likely achieve this feat
First, we need to set a bottom-line filter for companies that could achieve this mark in a decade. Many of these companies grew from a small basis and performed well for a long time to reach this level. Still, for a company to grow at a 20% compound annual rate for a decade is practically unheard of, so this will establish our baseline.
Achieving a $1 trillion valuation in a decade at a 20% compound annual growth rate (CAGR) would require a company to be worth at least $161 billion today. While a company could come up from even less than that, the odds of pinpointing that particular stock are astronomical.
Still, there aren't a lot of companies larger than $161 billion, as only 67 on July 11 had a valuation greater than that, so it's a fairly small list.
Three that I think could achieve this feat in a decade are Visa (V -0.23%), Taiwan Semiconductor Manufacturing (TSM 1.26%), and Mastercard (MA 0.07%). So why this trio? Let's take a look.
This trio could be worth $1 trillion in less than a decade
It would have been easy to pick companies that are already within striking distance; Tesla (NASDAQ: TSLA), Meta Platforms (NASDAQ: META), and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) are each valued at about $750 billion or greater.
At this point, the companies would only need to achieve a 3% CAGR over a decade or even a 6% CAGR in five years to reach $1 trillion in market cap. Unless something catastrophic happens, those three are well on their way to achieving (and maintaining) a $1 trillion valuation.
The following trio must perform decently (as indicated) to achieve a $1 trillion market cap.
| Company | Current Market Cap | CAGR Needed to Achieve $1 Trillion in a Decade |
|---|---|---|
| Taiwan Semiconductor | $517 Billion | 6.8% |
| Visa | $499 Billion | 7.2% |
| Mastercard | $372 Billion | 10.4% |
Data source: YCharts.
Still, these growth rates would be underperforming or matching the market, so this trio should achieve a $1 trillion market cap sooner than a decade.
All three of these companies have rapidly grown their revenue and earnings over the past five years and should continue to see growth.
The demand for Taiwan Semiconductor's cutting-edge chips will continue as more-impressive forms of technology -- like artificial intelligence (AI) -- are rolled out. Even though it hasn't finished rolling out its latest 3-nanometer chips, it's already working on the next generation of smaller, faster 2nm products.
With Taiwan Semiconductor products needed to build chips for AI, a new growth segment has recently opened up, which should provide a new avenue to achieve a $1 trillion market cap.
Visa and Mastercard are payments processing leaders, and the world is unlikely to start reverting back to cash anytime soon. While many thought cryptocurrency might dethrone these two leaders, that wave has passed, leaving Visa and Mastercard atop the payments processing pinnacle. As younger generations start spending, cash will only become more obsolete, giving Visa and Mastercard the growth they need to reach a $1 trillion market cap.
Furthermore, as a larger percentage of the global population becomes fluent with digital payments, a larger payment pool will become available, allowing both Visa and Mastercard to grow.
Each of these three companies operates in an expanding industry and is at the top of its game. With plenty of growth left, this trio should easily achieve a $1 trillion market cap in 10 years, but don't be surprised if it happens within five to seven.
