Meet the Unstoppable Stock That Just Joined Nvidia, Microsoft, and Apple in the $2 Trillion Club | The Motley Fool (2024)

Alphabet just delivered a spectacular quarterly result with accelerated growth in Google Search and significant progress in artificial intelligence (AI).

Six U.S. companies have a valuation of $1 trillion or more at the moment, and each of them operates in the technology sector. However, only four of them have graduated into the $2 trillion club:

  1. Microsoft, valued at $3 trillion.
  2. Apple, valued at $2.6 trillion.
  3. Nvidia, valued at $2.2 trillion.
  4. Alphabet (GOOG 0.32%) (GOOGL 0.37%), valued at $2.1 trillion.

Alphabet is the newest member, having joined last week shortly after reporting its financial results for the first quarter of 2024. The company's strong revenue growth, profitability, and substantial progress in the artificial intelligence (AI) space sent its stock soaring 10%, which put its market capitalization above the $2 trillion mark.

Despite achieving the impressive milestone, here's why Alphabet probably isn't done creating value for investors.

Alphabet is in the Gemini era

Google Search remains the crown jewel of Alphabet's business, but it needs to adapt to a world that is increasingly dominated by AI. Chatbots like OpenAI's ChatGPT -- which powers Microsoft's Bing search engine -- are far more convenient than traditional search engines, because they answer questions directly which saves the user from sifting through countless web pages to find the information they are looking for.

Alphabet is preparing for the broad launch of AI overviews, which will transform Google Search. Users will be able to click "overview" to generate an AI summary in response to their search query, and it will also let them ask follow-up questions. Traditional search results will still display below the overview option, so this could be the perfect balance between Google's existing product and the new chatbot-style interface many people have grown to enjoy.

Gemini is Alphabet's specific answer to ChatGPT and other prominent AI chatbots. The company says it outperforms the likes of OpenAI's latest GPT-4 models across most multimodal benchmarks, which means it's better at interpreting and generating text, images, videos, and computer code. Alphabet customers can add Gemini to popular applications like Gmail and Google Docs under the Google One subscription, which has already crossed 100 million paid users.

AI products like Gemini represent a substantial financial opportunity for Alphabet. The company has six products with more than 2 billion monthly users, and the ability to charge incremental fees for AI capabilities could unlock a new phase of growth. After all, $19.99 per month for Google One sounds like a great deal when you consider that Gemini can rapidly draft emails and other content which could save the end-user copious amounts of time.

Google Cloud continues to grow rapidly

Google Search generated $46.1 billion in revenue during the first quarter, which was a 14.3% year-over-year increase. It marked the second consecutive quarter of accelerating growth, and that's important, considering it represented half of Alphabet's $80.5 billion in total revenue during the quarter.

However, Google Cloud was the fastest-growing segment across the entire conglomerate. It generated $9.5 billion in Q1 revenue, representing a 28.4% jump compared to the year-ago period. It's great news for Alphabet, because Google Cloud is trying to catch its two main rivals in the cloud computing industry -- Microsoft Azure and Amazon Web Services -- both of which generate more revenue.

AI was a significant part of Google Cloud's strong performance. Alphabet says almost 90% of generative AI unicorns (start-ups worth $1 billion or more) are using Google Cloud to develop their models. The platform offers some of the most powerful data center infrastructure in the industry for training AI, underpinned by Nvidia's leading graphics processing chips (GPUs) and Google's own chips it designed in-house.

Google Cloud also offers over 130 ready-made AI models (including Gemini) to help customers accelerate their application development. Access to the industry's most advanced models can factor into a developer's decision to choose Google Cloud over competing platforms, so it's important to continue expanding that portfolio.

Meet the Unstoppable Stock That Just Joined Nvidia, Microsoft, and Apple in the $2 Trillion Club | The Motley Fool (1)

Image source: Alphabet.

$2 trillion doesn't have to be a stopping point for Alphabet

There is scope for Alphabet stock to continue delivering gains, even though it's already trading at an all-time high. The company is carefully managing costs and directing more of its resources to AI, which should improve its long-term profitability while also supporting its revenue growth.

The strategy produced a whopping 61% year-over-year increase in Alphabet's earnings per share during Q1. Based on the company's trailing-12-month earnings of $6.52, its stock trades at a price-to-earnings (P/E) ratio of just 26.5 -- that means it's 10.5% cheaper than its peers in the technology sector, represented by the 29.6 P/E ratio of the Nasdaq-100 index.

But it gets better for investors. Alphabet's board of directors just authorized a $70 billion stock buyback to return money to shareholders, which builds upon the $61.5 billion the company spent on repurchases in 2023. Plus, to the surprise of many analysts on Wall Street, Alphabet also announced it will start paying a dividend. On June 17, investors will receive a payment of $0.20 for each share they own, which translates to an annualized yield of 0.46%.

In summary, investors have an opportunity to buy Alphabet at a very attractive valuation right now, which could lead to significant returns over the long term thanks to its growing presence in AI. Plus, with the added bonus of a steady income stream, Alphabet might be the most attractive stock in the $2 trillion club.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Meet the Unstoppable Stock That Just Joined Nvidia, Microsoft, and Apple in the $2 Trillion Club | The Motley Fool (2024)


Meet the Unstoppable Stock That Just Joined Nvidia, Microsoft, and Apple in the $2 Trillion Club | The Motley Fool? ›


Alphabet Inc. is an American multinational technology conglomerate holding company headquartered in Mountain View, California. Alphabet is the world's third-largest technology company by revenue and one of the world's most valuable companies. › wiki › Alphabet_Inc
became the newest member last week, joining Microsoft, Apple, and Nvidia. Alphabet stock is still cheap despite trading at an all-time high, and it has significant future potential thanks to AI.

Is NVDA stock a buy or sell? ›

Over the past month, the Zacks Consensus EPS estimate has moved 0.44% higher. Nvidia currently has a Zacks Rank of #2 (Buy).

What is the price prediction for Nvidia stock? ›

NVDA Stock Forecast FAQ

Based on analyst ratings, Nvidia's 12-month average price target is $1,005.59.

What is the earnings prediction for NVDA? ›

NVDA Earnings Date

NVIDIA Corporation Common Stock is expected* to report earnings on 05/22/2024 after market close. The report will be for the fiscal Quarter ending Apr 2024. According to Zacks Investment Research, based on 13 analysts' forecasts, the consensus EPS forecast for the quarter is $5.14.

Who is the largest customer of Nvidia? ›

Unsurprisingly, big tech companies like Amazon, Meta Platforms, Microsoft, and Alphabet are believed to be among Nvidia's biggest customers, making up roughly 40% of its revenue. It's also clear that AI start-ups, like OpenAI, and autonomous vehicle companies, like Tesla, are significant customers of Nvidia.

What will Nvidia stock be worth in 2025? ›

So to answer the question, Nvidia could be worth $3 trillion by 2025 if it hits analyst estimates; it would just be an expensive stock.

Is Apple a buy, sell, or hold? ›

Apple's analyst rating consensus is a Moderate Buy. This is based on the ratings of 32 Wall Streets Analysts.

What will Nvidia stock be worth in 5 years? ›

Multiplying the projected earnings with Nvidia's five-year average forward earnings multiple of 39 suggests that its stock price could hit $2,266 per share (barring any stock splits or other events) after five years. That would translate into a jump of 162% from current levels.

How much will Nvidia be worth in 2030? ›

Assuming Nvidia is still trading at the same forward P/E, its stock price could reach $3,360 by the end of 2030, or 328% above the current share price. That would put its market cap at over $8 trillion.

Where will Nvidia be in 10 years prediction? ›

Analysts expect Nvidia's total revenue to triple by 2027 to $192 billion. Earnings are projected to grow 35% per year, which would put its future earnings at $105 by 2030.

Is it too late to invest in Nvidia? ›

Nvidia stock has soared over 220% in the last year, but now could still be as good a time as ever for investors to buy some shares.

Is Nvidia still a strong buy? ›

Analysts' Bullish Price Targets For Nvidia Stock

He sees stronger demand in 2024 and 2025 for Nvidia's chips. Analysts at HSBC also increased their price target, going to 1,050 from 880. Both Truist and HSBC maintained a buy rating on the stock.

Is Nvidia a long term buy? ›

Nvidia (NASDAQ: NVDA) is a prime example of what a successful buy-and-hold investment can deliver over the long run.

Who is Nvidia's biggest rival? ›

Nvidia has identified Chinese tech company Huawei as one of its top competitors in various categories such as chip production, AI and cloud services.

Who is behind Nvidia? ›

Founder, President and CEO

Jensen Huang founded NVIDIA in 1993 and has served since its inception as president, chief executive officer and a member of the board of ...

What makes Nvidia so special? ›

Once Nvidia realised that its accelerators were highly efficient at training AI models, it focused on optimising them for that market. Its chips have kept pace with ever more complex AI models: in the decade to 2023 Nvidia increased the speed of its computations 1,000-fold.

Is NVIDIA stock expected to rise? ›

Stock Price Forecast

The 41 analysts with 12-month price forecasts for NVIDIA stock have an average target of 922.85, with a low estimate of 460 and a high estimate of 1,200. The average target predicts an increase of 1.83% from the current stock price of 906.23.

Is NVDA expected to grow? ›

Future Growth

NVIDIA is forecast to grow earnings and revenue by 23.4% and 22.8% per annum respectively. EPS is expected to grow by 23.6% per annum. Return on equity is forecast to be 54.4% in 3 years.

What stock is a strong buy right now? ›

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Company (ticker)Analysts' consensus recommendation scoreAnalysts' consensus recommendation
Las Vegas Sands (LVS)1.47Strong Buy
UnitedHealth Group (UNH)1.48Strong Buy
Uber Technologies (UBER)1.49Strong Buy
Assurant (AIZ)1.50Strong Buy
15 more rows

Is NVIDIA a buy zacks? ›

NVIDIA Corporation - Buy

Valuation metrics show that NVIDIA Corporation may be overvalued. Its Value Score of D indicates it would be a bad pick for value investors. The financial health and growth prospects of NVDA, demonstrate its potential to underperform the market. It currently has a Growth Score of A.

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