Few companies have benefited from the rise of generative artificial intelligence (AI) as much as Nvidia (NVDA 0.74%). The chipmaker saw its stock price increase nearly eightfold from the launch of OpenAI's ChatGPT on Nov. 30, 2022, through the end of 2024. It's briefly spent time as the most valuable company in the world, and its current market cap sits around $2.9 trillion, as of this writing.
Nvidia's strong financial results look poised to continue in 2025 as big tech plans to spend tens of billions of dollars on AI data centers outfitted with its GPUs. Tech companies have remained committed to their spending plans, even after DeepSeek's open-source R1 model showed the cost-saving potential of software innovations over adding more advanced hardware. Still, there's now more apparent long-term vulnerability to Nvidia's cash cow than many investors saw previously.
Two other AI leaders have seen their long-term outlooks improve recently, and it could lead each of them to overtake the semiconductor giant's valuation in just a few years, if not sooner. Here are two companies that could see their stocks worth more than Nvidia within three years.
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1. Meta Platforms
Meta Platforms (META 0.80%) is one of Nvidia's biggest customers. The company behind social media platforms Facebook, Instagram, and WhatsApp has committed to between $60 billion and $65 billion in capital expenditures in 2025, including plans to build a massive data center in Louisiana. That data center will be filled with GPUs, mostly supplied by Nvidia.
There's good reason for Meta's continued investment in AI. It stands to benefit massively from the innovations of the last two years. It's already seen significant improvements to its recommendation algorithm for content across Facebook and Instagram by scaling it to a more general model based on principles it learned developing large language models.
The result is higher engagement and better ad targeting. That's evidenced by the 6% increase in ad impressions and 14% increase in average price per ad last quarter.
When it comes to generative AI, Meta has a lot to gain as well. It can make creating content more accessible to more users, further increasing engagement and active user count. It's developing tools that make it easier for marketers to create and test ad campaigns. Its AI-powered Advantage+ shopping campaigns fueled $5 billion worth of ad spending in the fourth quarter, and adoption is growing quickly.
NASDAQ: META
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Further down the road, Meta has massive opportunities with AI chatbots for businesses on WhatsApp. It's also integrating its Meta AI service into all of its products, including the Ray-Ban Meta glasses. As Meta AI scales to 1 billion users, it could become another revenue source for the company.
Meta's stock trades for 27.8 times forward earnings estimates, as of this writing. The multiple looks much more attractive if you look at earnings before interest, taxation, depreciation, and amortization (EBITDA) with an enterprise value-to-forward EBITDA ratio of just 15x. Meta should experience significant depreciation expenses over the next few years following its massive step-up in capital expenditures. But if its investments pay off as expected, it will be well worth the price for Meta's stock at its current valuation.
Meta could be a $3 trillion stock within three years by maintaining a P/E ratio in the mid-20s while growing earnings at a rate in the high teens. If Nvidia stock stagnates in that period as big tech looks to make AI profitable, it could overtake the chip giant's market value.
2. Amazon
Amazon (AMZN +1.63%) has seen its profitability explode over the last two years. Free cash flow went from negative $19.7 billion for the 12 months ending in September 2022 to $47.7 billion for the most recent 12-month period. And that growth looks poised to continue over the next few years.
The biggest driving force behind Amazon's recent success is its cloud computing business, Amazon Web Services, or AWS. Amazon operates the largest public cloud platform, and it's building tools to help developers build on top of the leading-edge foundation models for generative AI.
While Amazon was caught flat-footed in 2023 as competitors grew quickly, it rebounded well in 2024. After a flat year of operating income in 2023, it soared in 2024, climbing 60% in the trailing 12 months ending in September. That was fueled largely by margin expansion as operations scaled to catch up to its investments.
NASDAQ: AMZN
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Amazon's also increasing the profitability of its core e-commerce segment in several important ways. First, its Prime membership program continues to be extremely popular, driving strong subscription revenue growth. Second, advertising is growing across its marketplace and on Prime Video, offering a massive source of extremely high-margin revenue.
Finally, improvements to its logistics network and operations have enabled it to reduce its shipping costs per paid unit, increasing its operating margin. In fact, Amazon's North American operating margin reached 5.9% over the trailing 12 months, and its International reporting segment turned positive in mid-2024.
Amazon's investing a lot of money in building out both AWS and its e-commerce business. Management expects capital expenditures for 2024 to come to about $75 billion, and it plans to spend even more in 2025. But Amazon historically makes big steps up in capital expenditures before easing back and letting those investments produce strong free cash flow. When management takes its foot off the pedal and looks to make the most of all it's spent, it should see another step up in free cash flow.
Amazon stock currently trades for about 59 times trailing free cash flow, slightly above its historical average around 50. That suggests investors are pricing in faster growth in free cash flow going forward. As that free cash flow growth comes to fruition over the next few years, Amazon should see its share price climb higher, even if that multiple comes down. That could easily result in a $3 trillion valuation for the stock in the next couple of years, eventually overtaking Nvidia.
