The digital ad industry has become a massive business that changed the face of advertising and driven considerable returns in ad stocks such as Alphabet and Meta Platforms.

However, The Trade Desk (TTD 1.67%) has built a demand-side platform to allow advertisers and agencies to manage ad campaigns. Through its technology, the company has attracted many of the world's largest companies and earned more than $1.3 billion in revenue in the first nine months of 2023. That 23% increase also helped it earn a profit during that period.

The Trade Desk has become a large-cap stock, but does that allow it to reach a $1 trillion market cap by 2040? Let's take a closer look.

The Trade Desk's path to $1 trillion

The Trade Desk's current market cap is about $32 billion. While the company has reached a considerable size, the journey to $1 trillion by 2040 may appear difficult from that standpoint. Nonetheless, with the power of compounding, the stock would have to rise by an average of 24% per year for the next 16 years to arrive at $1 trillion.

At first glance, investors should not completely dismiss the possibility. The stock has risen by almost 40% over the last year. And even when factoring in the sell-off during the 2022 bear market, The Trade Desk's stock increased more than 390% over the previous five years.

Moreover, analysts forecast an average net income growth of 24% per year for the next five years. Admittedly, such forecasts are "way too early" predictions, but that shows the level of optimism surrounding the stock.

What could go right (or wrong)

Investors like The Trade Desk's stock because the company has attracted many of the world's largest businesses as clients and has kept them focused on maximizing returns. It uses artificial intelligence (AI) to scan data points. With its findings, the company can adjust purchases based on characteristics sought by the company's clients.

Furthermore, the market for these digital ads is massive. The Trade Desk estimates the size of the market at $830 billion. This bodes well for the company, especially since it maintains a customer retention rate above 95%. As long as The Trade Desk can stay ahead of prospective competitors in the years to come, investors should expect its massive growth to continue.

However, forecasting what the digital ad landscape will look like in one year is not easy, so predicting its condition 16 years from now may seem impossible. Hence, investors cannot dismiss the possibility of this growth story getting derailed by a factor not apparent to today's investors.

Will The Trade Desk reach $1 trillion by 2040?

If The Trade Desk maintains its current growth pace, $1 trillion by 2040 is achievable. Right now, the five-year returns in the stock far exceed the 24% annual growth needed to reach that milestone.

Unfortunately for shareholders, predicting the state of the digital ad business in 2040 and the technology supporting it is an extremely challenging endeavor. Although it is quite possible for The Trade Desk to consolidate its dominance amid changes, strategic missteps could also harm its business.

For the foreseeable future, The Trade Desk will likely attract more business and maintain the rapid growth rate needed to take the stock higher. While it may or may not reach $1 trillion, it should deliver outsized returns to shareholders.