3 Surprising AI Stocks Heading to a $1 Trillion Market Cap

By | March 19, 2024

Artificial intelligence (AI) is a transformational technology. Thanks to AI, some established companies will develop additional revenue streams, while others will struggle to find a place in the new business and technological environment.

Still, other companies, often not considered AI stocks, could experience rapid growth, potentially emerging from nowhere to grow to a market cap of $1 trillion or more. While it’s difficult to accurately predict which growth stocks will reach such a milestone, three Motley Fool contributors have ideas on which of these less obvious AI stocks could grow their market cap past $1 trillion.

An old-fashioned tech stock is benefiting from the AI ​​revolution

Jake Lerch (Oracle): My choice is Oracle (NYSE: ORCL)thanks to the resurgent cloud business fueled by skyrocketing demand for artificial intelligence data servers.

On the company’s most recent earnings call (for the three months ended February 29), Oracle Chairman Larry Ellison said was very simple in admitting it MicrosoftThe explosive growth of the cloud is driving great success for Microsoft suppliers, including Oracle. “We are building twenty data centers [for] Microsoft and Azure. They just ordered three more data centers this quarter,” Ellison said.

In turn, Oracle’s total revenue rose 7% year over year to $13.3 billion in the most recent quarter. In fact, management provided optimistic guidance, indicating that future sales targets could be achieved sooner than expected as the company’s cloud services segment grows 25% year-over-year.

As for the company’s stock, it might come as a surprise that Oracle is already America’s 20th largest company, with a market cap of $345 billion, making it more than twice the size of iconic companies like Verizon, CaterpillarAnd American Emphatic.

What’s perhaps more shocking, especially to those of us who lived through the total stock collapse in the wake of the dot-com bubble, is that Oracle has been a solid investment for more than a decade. Oracle stock has actually outperformed Oracle stock S&P500 the past ten years.

ORCL Total Return Level ChartORCL Total Return Level Chart

ORCL Total Return Level Chart

So it may be time for investors to take another look at Oracle. Thanks to the lightning-fast cloud activities, this is Web 1.0 The name could be on its way to a market cap of $1 trillion.

TSMC doesn’t get the credit it deserves

Justin Pope (Taiwan semiconductor manufacturing): Semiconductors have become the building blocks of AI; the chips power the massive computers needed to process the data to train AI models. Nvidia, the current king of AI chips with the largest market share, does just over $60 billion in enterprise-wide sales annually. CEO Lisa Su of Advanced micro devicesrival Nvidia, believes the AI ​​chip market will grow to $400 billion in the coming years.

Despite the fact that they are well-known chip giants, neither Nvidia nor AMD actually manufacture their chips. That job belongs to production specialists such as Taiwanese semiconductor manufacturing (NYSE: TSM). TSMC is the world’s largest semiconductor manufacturer, with an estimated 56% share of the world’s chip production. As an industry leader, you can rest assured that TSMC is the place to go for these new, highly advanced chips that power the latest innovations like AI.

The market isn’t exactly sleeping on TSMC stock. After all, the company is worth more than $600 billion today. However, it’s still fairly priced: 23 times analysts’ estimated 2024 earnings of $6.17 per share.

Think about it. If semiconductor demand drives the AI ​​chip market to such massive growth (several times its current size if Lisa Su is right), much of that business will trickle down to TSMC. It’s not hard to see the company’s profits doubling over the next decade, which would be more than enough to push TSMC past a trillion-dollar market cap.

The future looks bright for the world’s leading chip factory, and a trillion-dollar valuation seems more likely to be a matter of when not as.

This travel stock should continue to post AI-powered gains

Will Healy (Airbnb): Most consumers see it Airbnb (NASDAQ:ABNB) as a tourism company, and that is understandable. It has turned the holiday rental industry upside down and turned every home into a potential holiday property. Furthermore, it has enhanced this reputation by offering activities that could appeal to holidaymakers.

Nevertheless, it would probably surprise many customers and even some investors to know that Airbnb likely owes its success to AI. Firstly, it is not a first mover in this area. That claim belongs to Expedia.com‘s VRBO. Furthermore, unlike a hotel chain such as Hiltonit is not the owner of the properties that helps rent it out.

In reality, Airbnb is little more than a classifieds website with a high degree of brand awareness. The company promotes its competitive advantages through AI. The technology helps with challenges such as determining the right price levels in a certain area or assessing the reputation of potential tenants.

Airbnb has also found unusual uses for AI. The technology plays a role in enforcing restrictions on vacation activities and assessing the likelihood that a renter will violate such rules.

Airbnb has also started testing its AI chatbot to handle many customer support queries. To that end, it recently purchased GamePlanner, a company that can supposedly make AI experiences on Airbnb seem more human.

Furthermore, the company could be closer to a $1 trillion market cap than some might think. Thanks to the 7.7 million listings and 448 million nights and experiences booked in the fourth quarter of 2023 alone, the stock has already grown to a market cap of $105 billion – meaning it would need to double roughly 3.2 times to reach boost market capitalization. $1 trillion.

Granted, such a feat will likely take a few years, as the market cap will still need to grow nearly ninefold to reach that milestone. Additionally, Airbnb’s price-to-earnings ratio of 23 was lowered by a one-time tax benefit, making its true revenue-based valuation higher than it appears.

However, its price-to-sales ratio of 11 is not far from a record low, a factor that should serve as a catalyst as sales and profits continue to rise. As AI continues to increase business productivity, the $1 trillion market cap should eventually be within reach.

Should You Invest $1,000 in Oracle Now?

Consider the following before buying shares in Oracle:

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American Express is an advertising partner of The Ascent, a Motley Fool company. Jake Lerch has positions at Airbnb, Caterpillar and Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy holds positions in Advanced Micro Devices. The Motley Fool holds positions in and recommends Advanced Micro Devices, Airbnb, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Verizon Communications and recommends the following options: $395 long calls in January 2026 at Microsoft and short calls in January 2026 at $405 at Microsoft. The Motley Fool has a disclosure policy.

3 Surprise AI Stocks Headed to a $1 Trillion Market Cap was originally published by The Motley Fool

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