Currently, there are seven stocks with valuations topping at least $1 trillion. By the end of the year, there could be a couple more companies joining that list. And by the end of the decade, there will likely be even more.
One company that possesses tremendous growth opportunities related to artificial intelligence (AI) and may join that exclusive club in the future is chipmaker Advanced Micro Devices (AMD -0.25%), better known as AMD. Today, its market cap is around $300 billion.
Can investors expect that by 2030, it will be able to reach a $1 trillion valuation?
AMD's stock would need to grow by more than 20% per year
For AMD to more than triple in value by the end of the decade and hit a $1 trillion market cap, the stock price would need to rise by around 245%. Over a six-year span, that averages out to an annual growth rate of approximately 23%.
Historically, AMD has been a good growth stock to own -- its share price has soared by more than 420% in just the past five years. But with the business becoming larger, expectations rise, and it's not as easy to increase sales and profits at a high rate. In the past three years, for example, AMD's top line has gone from $9.8 billion in 2020 to $22.7 billion in 2023. For it to achieve similar growth in the next three years, its annual sales would need to total nearly $53 billion.
Whether it can deliver that kind of growth will depend on its ability to steal some market share away from chipmaker and key rival Nvidia.
Artificial intelligence will determine AMD's long-term gains
There are some truly staggering growth opportunities in the AI chip market. Just about every company is trying to roll out new AI-powered products and services to avoid missing out on the latest craze in tech.
According to a report from analysts at Technavio, the AI chip market is expanding at a compound annual growth rate of more than 68% until 2028. While Nvidia is a leading player in that space today, if AMD can secure some of the market for itself, it may not be all that difficult for the business to generate significant growth in the years ahead and for the stock to continue rallying.
AMD is working on launching new AI chips in order to try and take on Nvidia, which has about an 80% market share today. Last month, AMD CEO Lisa Su said, "AI is clearly our No. 1 priority." One of its newest chips, MI350, will be available next year, which will perform much better than its current MI300 chips. And in 2026, AMD plans to roll out the MI400, a series of chips that will be based on even newer technology.
AMD looks likely to hit $1 trillion by 2030
Nvidia garners a lot of the excitement when it comes to AI these days. But companies will want alternatives and other businesses to buy chips from. And as AMD's new chips come to market, potentially offering lower-cost alternatives, it could benefit from strong demand and high growth rates for years to come.
For AMD to more than triple in value in about six years isn't all that unlikely given the promising opportunities in the AI chip market. As long as the company can successfully execute and take some market share from Nvidia, it looks highly probable that the business will grow at a fast enough rate to send its stock to a $1 trillion valuation by 2030.
