Apple is currently the third largest public company, with a market value of $3.1 trillion. I expect two artificial intelligence stocks to surpass that figure within five years. I am not talking about Nvidia, which is already worth $4.3 trillion, but rather Meta Platforms (META -2.99%) and Broadcom (AVGO -1.68%).
Here's what my prediction would mean for shareholders:
- Meta Platforms is currently worth $1.7 trillion. The stock must gain 88% for the company to achieve a market value of $3.2 trillion, which implies annual returns of 13.5% over the next five years.
- Broadcom is currently worth $1.4 trillion. The stock must advance 129% for the company to achieve a market value of $3.2 trillion, which implies annual returns of 18% over the next five years.
Here's why I have confidence in my predictions.
Image source: Getty Images.
1. Meta Platforms
Meta Platforms owns three of the four most popular social media platforms in Facebook, Instagram, and WhatsApp as measured by monthly active users. That ability to engage people and collect data makes the company a valuable advertising partner, so much so that Meta is the second largest ad tech company in the world behind Alphabet's Google.
Meta is successfully using artificial intelligence (AI) to improve consumer engagement with better content recommendations across its social media properties. CEO Mark Zuckerberg told analysts on the first-quarter earnings call time spent on Facebook increased 7% and time spent on Instagram increased 6% in the past six months.
Meta is also using artificial intelligence to help marketers optimize campaign performance. The number of advertisers using AI creative tools rose 30% in the first quarter, and better ad targeting for Reels increased conversion rates by 5%. Also, Meta recently introduced new AI features that let marketers turn images into videos, embed conversational agents into ads, and translate campaigns into multiple languages.
Importantly, Meta has opportunities beyond artificial intelligence. The company dominates the nascent smart glasses market, which tripled in size last year and is forecast to increase faster than 60% annually through 2029, according to Counterpoint Research. Zuckerberg has frequently asserted smart glasses with built-in holographic displays will eventually replace smartphones.
Here's why Meta could surpass Apple's current market value by 2030: Wall Street estimates the company's earnings will grow at 15% annually in the next three to five years. That makes the current valuation of 27 times earnings look reasonable. And if Meta's earnings do grow at 15% annually through 2030, its market value could increase 88% to $3.2 trillion while its valuation multiple drops to 25.5 times earnings. That seems entirely plausible.
2. Broadcom
Broadcom develops infrastructure software and semiconductor solutions. The company is the market leader in Wi-Fi chipsets, which let devices like smartphones connect to wireless networks. It also dominates the market for Ethernet switch chips, which move information between data center servers and storage. Demand for high-speed networking chips will increase as artificial intelligence workloads become more common.
Additionally, Broadcom is the leading supplier of custom AI accelerators, commonly called application-specific integrated circuits (ASICs). The company currently develops AI ASICs for seven hyperscale clients, including Apple, ByteDance, Google, Meta Platforms, and OpenAI. Broadcom also has two other unnamed customers. Morgan Stanley analysts estimate the market for AI ASICs will increase at 34% annually through 2030.
Here's why Broadcom could top Apple's current market value by 2030. Wall Street expects adjusted earnings to grow at 20% annually through 2028. That makes the current valuation of 52 times adjusted earnings look tolerable. But if Broadcom's earnings increase at 20% annually through 2030, its market value could jump 129% to $3.2 trillion while its valuation drops to a more reasonable 47 times earnings.
Admittedly, it will be more difficult for Broadcom (compared to Meta Platforms) to surpass Apple's current market value within five years. But I still think it's a distinct possibility. Not only because the company beat the consensus earnings estimate by 4% during the past six quarters -- which suggests Wall Street analysts may be underestimating future earnings growth -- but also because management says AI chip revenue could more than quadruple by 2027.
