Finding companies with $1 trillion potential isn't quite as hard as you might think. Many of the likeliest candidates are already quite large with strong businesses that most consumers know well. Yet, understanding when they could reach that size is a more challenging question altogether.
Still, I've identified three companies I believe are surefire investments to reach $1 trillion in market capitalization within the next decade or sooner. The three that I think will cross this threshold are Tesla (TSLA 15.31%), Taiwan Semiconductor (TSM 0.14%), and Mastercard (MA -1.15%).
But when might they gain membership in this exclusive club? Read on to find out.
Each has a well-defined path to reaching $1 trillion
Okay, Tesla is a bit of a softball in this analysis. At an $875 billion market capitalization, it only needs to grow 14% to reach $1 trillion. And with Tesla's strong foothold in the electric vehicle (EV) market, it's hard to imagine that it won't soon regain entrance into the $1 trillion club (it was last there in 2022) and stay there permanently.
With Tesla's production numbers rapidly rising (up 86% year over year in Q2), it has a solid following in the auto world as a top EV option. Even though the legacy automakers are starting to launch their own EVs, there is little to suggest Tesla is in any danger of losing its leadership position in the U.S.
Moving on to a slightly more aggressive pick, Taiwan Semiconductor (TSMC) is the world's top semiconductor foundry. Because it is a contract factory, companies like Apple and Nvidia have TSMC make their chips, which gives the chips a uniquely neutral position in the marketplace. With industry-leading 5nm (nanometer) and 7nm chips, TSMC is pushing technological limits by also creating 3nm chips, which are more powerful and energy efficient.
Because nearly every high-end electronic device uses TSMC's products, this company could easily see a strong push toward $1 trillion. But it needs to grow by 111% to reach a trillion-dollar valuation.
Finally, Mastercard is the most aggressive pick on this list. Sitting at just shy of a $400 billion market cap, Mastercard's stock would need to grow 157% to be worth $1 trillion. However, Mastercard is well-positioned to achieve this goal.
Unlike rival Visa, most of Mastercard's revenue is internationally based (68% in the second quarter). This bodes well for Mastercard as it can be a driving force in the growth of emerging market economies by enabling them to process digital transactions in person and online. Even though a large chunk of the U.S. is now cashless, this is far from the case worldwide.
Same goal, but sharply varying time frames
While all three companies have a strong case to reach $1 trillion eventually, how long will it take to get there? Let's take a look.
With Tesla only needing 14% growth to rejoin the $1 trillion club, that could potentially happen in anywhere from a month to a year. Although Tesla's valuation is often a sticking point for investors, it's currently around the highest it has been in 2023.
TSLA PE Ratio data by YCharts
If the market's risk appetite rises, Tesla will likely be worth more than $1 trillion by year's end. But if it turns pessimistic, Tesla could experience a significant sell-off and take much longer to be worth $1 trillion.
TSMC expects massive growth in chips devoted to AI -- potentially at a 50% compound annual growth rate (CAGR) over the next five years. However, those chips only make up around 6% of TSMC's current revenue, so it won't make a massive dent. Still, the overall stock market averages a double every seven years, and with TSMC growing above market pace, it should be worth more than $1 trillion in less time than that.
For Mastercard to reach $1 trillion, it would need a CAGR of 10% -- about the same as the market. Over the past five years, Mastercard's revenue has increased at that rate, including a period when COVID-19 restrictions severely harmed the company. Throw in share repurchases, and Mastercard should be able to grow its earnings faster. I think Mastercard can reach a $1 trillion valuation, but it will likely take most of the decade for the company to do it.
Regardless of the time frame, these three have been market-beating investments. They are all well-suited to do it again and can make great investments.
