In 2018, Apple became the first company worth $1 trillion based on its market capitalization. Since then, tech giants Microsoft, Amazon, Alphabet, and Nvidia have joined the exclusive club.
Reaching the trillion-dollar club is a monumental achievement and testament to these companies' incredible journey and global influence. Their market dominance also means they comprise a sizable portion of the S&P 500 index because of the index's market-cap weighting.
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Soon enough, companies outside of technology could join the exclusive group. Three companies that could reach the milestone in the next decade (or sooner) are Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%), Visa (V -0.23%), and JPMorgan Chase (JPM 0.06%). Here's how.
1. Berkshire Hathaway's current market capitalization is $795 billion
Berkshire Hathaway is a conglomerate that owns businesses across industries, including insurance, freight rail transportation, energy, and manufacturing. The company also manages a massive $371 billion investment portfolio, which has grown substantially under the leadership of CEO Warren Buffett. Berkshire's $795 billion market cap makes it the eighth-largest company in the U.S.
Its diversified businesses are managed in a hands-off fashion. The steady cash flows they produce make these companies great holdings for Buffett and his team. Last year, the company generated $26.7 billion in free cash flow. Over the past decade, its free cash flow has averaged $22.8 billion annually, providing the conglomerate with plenty of money to spend on dividends, share buybacks, acquisitions, and investments.
Berkshire's market cap has grown from $292 billion to $795 billion in the past 10 years, or 10.5% compounded annually. For the company to reach the $1 trillion threshold in the next decade, it would have to gain 2.3% compounded annually. The target should be easy for Berkshire, considering its cash-flow-positive businesses and the investing acumen of Buffett and his co-portfolio managers, Ted Weschler and Todd Combs.
2. Visa's current market capitalization is $522 billion
Visa dominates the payment space thanks to strong network effects that create an economic moat around its business. The payments company has had six decades to build up its merchant and customer base. As more merchants accept Visa, more customers use it -- creating a feedback loop that allows Visa to reinvest in the business, scale up, and improve security, attracting even more business.
In 2022, Visa processed $11.7 trillion in total payment volume and had 4.2 billion cards globally. Its next-closest competitors, Mastercard and American Express, processed $6.6 trillion and $1.5 trillion in total payment volume, respectively.
One appealing aspect of Visa is that it collects fees whenever its cards are swiped. Banks and other financial institutions it partners with are responsible for holding on to and managing loans on Visa credit cards. The company is extremely efficient at generating profits, and over the past decade, its profit margin has averaged a stellar 47%.
Over 10 years, its market cap has gone from $140 billion to $534 billion, or 14.3% compounded annually. For Visa to reach $1 trillion by 2034, its market cap would have to grow 6.5% annually. According to a report by Grand View Research, the global payment processing market could grow by 14.5% annually by 2030, and Visa's strong moat has it perfectly positioned to grow with it.
3. JPMorgan Chase's current market capitalization is $498 billion
Under the guidance of CEO Jamie Dimon, JPMorgan Chase has been one of the best-run banks in the U.S. Dimon has helped steer the bank through the Great Recession, a decade of ultra-low interest rates, the pandemic, and the recent period of high inflation and rising interest rates.
JPMorgan Chase's fortress balance sheet and prudence in managing risk could help propel it toward the $1 trillion club. The bank did a stellar job of navigating the lower interest rate environment in 2020 and 2021. When many banks were taking on bonds, JPMorgan Chase "hoarded cash" to prepare for the possibility of higher interest rates.
With its firm financial foundation, JPMorgan Chase emerged victorious when the federal government auctioned off First Republic Bank, one of the regional banks that went under last year amid deposit outflows and higher interest rates.
Over the last 10 years, JPMorgan Chase's market cap has gone from $220 billion to $498 billion, or an 8.5% compound annual growth rate. For the bank to reach the $1 trillion milestone, its market cap would have to grow 7.2% annually over the next decade.
JPMorgan Chase is a well-run bank that takes risk management seriously so it can navigate whatever the economy throws at it -- which is why it could be the first bank to join the $1 trillion club.
