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Apple’s market cap has yet again topped $3 trillion, and the iPhone maker continues to be the largest company not only in the U.S., but also globally. Apple (AAPL) has several laurels to its name already - but will it also become the first-ever company to reach a $5 trillion market cap, or are there other viable contenders for the coveted milestone? We’ll explore in this article.
To begin with, while Apple is the first-ever U.S. company to have a market cap of $1 trillion - and then $2 trillion, as well as $3 trillion - the first global company to reach a market cap of $1 trillion was PetroChina, which achieved the milestone as recently as 2007.
Apple became the world’s most valuable company in 2011, when it surpassed energy giant ExxonMobil (XOM), which was then holding the title. Since then, the Cupertino-based company has mostly held on to the position as the world’s largest company, aside from a few brief incursions – including in October 2021 when Microsoft (MSFT) took over the crown, and in May 2022 when Saudi Aramco became the world's most valuable company. These instances have been few and short-lived, though, and Apple has quickly reclaimed its title.
Which Companies Could Be Worth $5 Trillion?
The following companies have a realistic chance of becoming $5 trillion behemoths this decade:
Could Apple Become a $5 Trillion Company?
Apple should eventually become a $5 trillion company. The company has a strong brand, and one of the most appealing product lineups that resonates globally. While Apple products are a “must-have” for many, they remain aspirational for many others. No wonder, then, that Warren Buffett is a big fan of Apple products, as well as the shares - which are the largest holding for his Berkshire Hathaway (BRK.B) equity portfolio.
One of the key long-term drivers for Apple is its burgeoning user base and ecosystem. It now boasts an installed base of over 2 billion devices, along with the prospect of recurring revenues from 1 billion paid subscriptions.
This vast user base is a captive market for Apple as it diversifies into multiple other industries - including financial services and healthcare. In 2024, Apple will also start delivering its augmented reality headsets, which should further increase its target market.
Apple's big bet on India, which has surpassed China to become the most populous country, will also help the company increase its target market. Currently, Android devices account for 95% of the Indian smartphone market - which is the second-largest globally after China, and boasts a growing and aspirational middle class. That makes it an attractive market for Apple to increase iPhone penetration levels.
That said, Apple’s path to becoming a $5 trillion company is not easy, and it faces multiple challenges and headwinds. These include:
- Geopolitical tensions: The growing U.S.-China rivalry and its potential impact on Apple’s sales in the country is a risk. Also, while it is focusing on several other emerging markets, none of these (including India) has the potential to be the “next China” for Apple anytime soon.
- Untested products: Apple’s bet on augmented reality headsets is risky, given that even Meta Platforms (META) has struggled to sell these at scale, and at a price point much lower than Apple’s.
- Plateauing iPhone sales: iPhone sales might have plateaued in key developed markets, and the updated models every year have been largely incremental and not exactly path-breaking.
- Valuations: Finally, with Apple’s valuations leaving little chance of multiple expansion, its earnings might need to rise significantly for it to become a $5 trillion company.
Overall, Apple might need much more than its focus on emerging markets and augmented reality headsets to become a $5 trillion company – at least, anytime soon.
Among other companies, Nvidia’s market cap is around $1.15 trillion, and would need to rise about 5x to be a $5 trillion company. Looking at its past performance, as shown in the chart below (which, as a boilerplate note of caution, is no indicator of the future), Nvidia also looks like it's in contention to be a $5 trillion company - especially if the sales of its artificial intelligence (AI) chips continue their currently high growth trajectory. However, while Nvidia might eventually become a $5 trillion company, I don’t expect it to be the first to reach that level.
Then we have Tesla, whose CEO Elon Musk expects it to be a nearly $5 trillion company – based on his argument that the company’s market cap could one day surpass the combined market cap of Apple and Saudi Aramco. However, given the EV price war and the unending wait for full autonomous driving, it looks unlikely that Tesla might become the first $5 trillion company.
I would also rule out Alphabet becoming the first $5 trillion company, even as it looks among the best trillion-dollar companies to buy for 2024. Amazon is another worthy candidate to be a $5 trillion company, and many analysts see it as a top pick for 2024 - but the company has a long way to go, and would need to more than triple its market cap to reach the milestone. Looking at the kind of top-line growth that Amazon is currently witnessing, the prospect of its shares tripling anytime soon seems a bit too much.
Microsoft Could Also Become a $5 Trillion Company
This leaves us with Microsoft, the second-largest company on the planet. The software giant has several growth drivers, and has also grown the business inorganically – the most recent being the acquisition of gaming giant Activision-Blizzard, which was the biggest tech acquisition ever. Unlike Apple, which spends big on share buybacks, Microsoft has a history of mega acquisitions.
Some of these acquisitions – and especially the ill-fated acquisition of Nokia’s phones unit – failed to live up to expectations. However, there have been success stories, like LinkedIn, which is now a key driver of Microsoft’s growth. Microsoft’s cloud business is also now second only to market leader Amazon Web Services (AWS). While the pace of AWS growth has fallen sharply, Microsoft’s cloud revenues are still expanding at a reasonably fast pace.
Microsoft’s partnership with ChatGPT’s parent company, OpenAI, could be another growth driver, and the Bing parent continues to nibble at Google's dominant share in the global search market.
In my view, either Microsoft or Apple looks poised to become the first $5 trillion company. While Microsoft might need a serious AI breakthrough to win the race, Apple will likely require a nearly “iPhone-sized opportunity” to get the edge.
On the date of publication, Mohit Oberoi had a position in: AAPL , AMZN , NVDA , META , BRK.A , GOOG , MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
