Much of what drives the U.S. economy has changed over the past couple of decades. For example, energy stalwart ExxonMobil and industrial bellwether General Electric were the two largest publicly traded companies by market cap in 2005, valued at $375 billion and $362 billion, respectively. Fast forward 20 years, and technology companies -- particularly those well-versed in artificial intelligence (AI) -- lead the list. In fact, nine of the world's 10 most valuable companies have clear ties to AI.
Only four companies have earned membership in the ultra-exclusive $3 trillion club, and each is a powerhouse in its own right. Chipmaker Nvidia tops the charts at $4.5 trillion (as of this writing), with iPhone maker Apple nipping at its heels at $4.1 trillion. Search pioneer Alphabet recently vaulted to No. 3 at $3.8 trillion, while cloud and software provider Microsoft clocks in at $3.6 trillion to take the No. 4 position.
The next generation of triple trillionaires is already in the making. I predict that Broadcom (AVGO 1.24%), at $1.9 trillion, and Meta Platforms (META 2.38%), at $1.6 trillion, will soon make the grade, joining the $3 trillion club by the end of 2027.
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The case for Broadcom
The accelerating adoption of AI over the past few years has sparked a rapid and ongoing expansion in the data center space. While Broadcom is primarily known as a semiconductor company, many of its networking supplies and accessories are critical components required for the data center buildout.
Furthermore, its Application-Specific Integrated Circuits (ASICs) -- chips that can be customized for specific use cases -- have been hailed as an energy-efficient alternative to Nvidia's graphics processing units (GPUs) for certain large-scale applications.
In the third quarter, Broadcom delivered revenue of $15.9 billion, up 22% year over year, driving adjusted earnings per share (EPS) up 36% to $1.69. Perhaps as importantly, its backlog hit a record $110 billion, fueled by strong demand for AI.
Broadcom has a market cap of $1.89 trillion (as of this writing), so it will take gains of 59% to bring its market cap to $3 trillion. The company is expected to generate revenue of $63.4 billion in 2025, according to Wall Street, resulting in a forward price-to-sales (P/S) ratio of roughly 30. If its P/S remains constant, Broadcom will need to generate revenue of roughly $100 billion annually to support a $3 trillion market cap.
Wall Street is bullish, forecasting revenue growth of 29% annually over the coming five years. If the company meets that benchmark, it could generate $100 billion in revenue and achieve a $3 trillion market cap as early as 2027. Furthermore, it boasts a price/earnings-to-growth (PEG) ratio of 0.42, when any number lower than 1 is the measure of an undervalued stock.
The case for Meta Platforms
Meta Platforms has long been at the forefront of AI development, using these sophisticated algorithms to surface more relevant content on its social media platforms and better target its advertising to the right audience. The advent of generative AI has supercharged the company's results as Meta's Llama AI models are ranked among the best in the industry.
In the third quarter, CEO Mark Zuckerberg revealed that the company's AI recommendation engine was "delivering higher quality and more relevant content." As a result, users are spending 5% more time on Facebook and 10% more on Threads. Higher engagement is boosting advertising revenue, as the average price per ad has increased by 10%.
This success is fueling the company's financial results. In the third quarter, Meta generated revenue of $51.2 billion, which jumped 26% year over year, resulting in adjusted EPS of $7.25, which climbed 20%.
Meta has a market cap of roughly $1.68 trillion (as of this writing), so it will take a stock price increase of roughly 78% to propel its value to $3 trillion. Wall Street estimates that Meta will generate revenue of more than $199 billion in 2025, resulting in a forward price-to-sales (P/S) ratio of 8. Assuming its P/S remains constant, Meta will need to generate revenue of roughly $355 billion annually to support a $3 trillion market cap.
Wall Street is currently forecasting Meta's revenue growth at nearly 15% annually over the next five years. If the company can achieve that benchmark, it could surpass a $3 trillion market cap as soon as 2029.
However, recent reports suggest Meta plans to make steep cuts to its metaverse spending, something that has long weighed on the stock. I suspect investors will reward Meta with a higher multiple, and the resulting valuation expansion will knock a couple of years off those calculations. And a 29 times earnings, the price is right.
