As of this writing, there are three $3 trillion stocks on the market. And in what is unsurprising news, they're all artificial intelligence (AI) stocks. They are Apple ($3.7 trillion), Nvidia ($3.5) trillion, and Microsoft ($3.2 trillion).
It's truly incredible how new generative AI technology, which only came to broad market attention two years ago, has already shifted so much in business and communication. Going forward, it's likely to continue to shape how people interact, work, and live.
One AI giant mysteriously absent from this list is Amazon (AMZN +0.81%). It's not too far off, coming in as the fifth most valuable company in the world. But it has a ways to go, with a market cap of $2.3 trillion today.
Amazon stock gained 44% over the past year. Although it's unlikely to skyrocket in 2025, I'll explain why it could steadily gain this year and hit a $3 trillion market cap by next year.
It's not just AI
Amazon has incredible AI tailwinds pushing it forward right now. Management keeps saying things like it's a "once-in-a-lifetime type of opportunity," that it's still in its infancy, and that there's going to be a watershed moment when business spend shifts to the cloud and the generative AI services it offers. According to Statista, the AI sector is expected to increase at a compound annual growth rate (CAGR) of 27.7% through 2030 and reach nearly $827 billion.
NASDAQ: AMZN
Key Data Points
Amazon is working to develop the most comprehensive AI program to attract clients and generate sales. Even at these levels, which management thinks is just the beginning, the generative AI business is already bringing in billion of dollars for Amazon. The Amazon Web Services (AWS) cloud computing segment is drawing more business as clients want to be on the cloud to benefit from AI, and AWS sales are accelerating.
But Amazon is so much more than AI. Most people know it as an e-commerce giant, and people who aren't in a situation to be a client of AWS may have no idea what cloud computing offers. Amazon has as much as 40% of the total U.S. e-commerce market, and its delivery trucks are ubiquitous on U.S. highways.
According to e-Marketer, e-commerce is expected to increase from 20.3% of total retail sales in 2024 to 23% in 2027. Amazon will benefit organically from that shift, but it's making improvements in its logistics network to get more products to more customers faster all the time and grab an even bigger bite of the market.
Amazon is well-positioned to keep its top spot in e-commerce and cloud computing, plus it has growing businesses in advertising, healthcare, and more.
Why can't Amazon reach $3 trillion this year?
There is a possibility that Amazon will hit $3 trillion in 2025, but it's unlikely. Amazon's sales have increased at a CAGR of around 10% over the past three years, and net income has increased at a CAGR of about 15%. Using that rate for 2025, full-year revenue would reach $682 billion, and net income would come in at $57.5 billion. Keeping the current price-to-sales and P/E ratios constant, its market cap would be somewhere between $2.6 billion and $2.7 billion. The valuation ratios would have to significantly increase for the market cap to hit $3 trillion. That could happen, but these are not bargain ratios that investors should expect to go up, at 3.8 and 47.
However, continuing to next year keeping the ratios constant and using the same CAGRs, estimates come out with a market cap between $2.8 trillion and $3.1 trillion.
There are obviously all sorts of reasons these numbers could be substantially different than expected, and investor sentiment can send the stock and the valuation higher this year -- or it might reach $3 trillion later than 2026. But the likelihood is that Amazon keeps reporting strong, steady growth, rewarding investors, and hitting the $3 trillion mark in 2026.
