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The U.S. is home to almost all the trillion-dollar companies in the world. Currently, Saudi Aramco is the only non-U.S. company to command a market cap above $1 trillion. In this article, we’ll take a look at the best trillion-dollar companies investors should buy for 2024.
While Apple (AAPL) 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 have a market cap of $1 trillion was PetroChina, which achieved the milestone as recently as 2007. However, the Chinese energy giant could not hold on to the levels for long, as oil prices crashed and never recovered to their 2008 highs.
Over the last couple of years, there has been a big churn in trillion-dollar companies. In 2021, both Tesla (TSLA) and Meta Platforms (META) joined the ranks of trillion-dollar companies, only to drop out in 2022 - which was a terrible year for tech stocks. Even Amazon’s (AMZN) market cap fell below $1 trillion in 2022, as the e-commerce giant lost over half of its market value amid the slump.
However, 2023 has been a good year for tech names. While Tesla and Meta Platforms have yet to reclaim a $1 trillion market cap, despite stellar rallies, we have a new entrant in the form of Nvidia (NVDA), which became the first chip designing company to join the coveted club.
Which Companies Are Worth a Trillion Dollars?
Currently, five U.S. companies have a market cap above $1 trillion. These are:
- Apple
- Microsoft
- Alphabet
- Amazon
- Nvidia
While all of these companies are good long-term investments in their own right, I believe Amazon and Alphabet look like especially strong buys for 2024. Here’s why.
Amazon Stock Is Still Below Its All-Time Highs
Amazon’s market cap peaked at around $1.8 trillion in mid-2021, when the stock hit its all-time high. However, the stock fell from those levels and eventually closed the year with marginal gains, missing out on the tech rally that year.
While Amazon looked set to join the league of $2 trillion companies, it briefly lost even its trillion-dollar status amid the tech rout of 2022. However, I believe that the worst is over for AMZN - and even after an almost 75% rise in 2023, the stock has room to run higher.
First, Amazon’s revenue growth is expected to stabilize and grow in low double digits, led by strength in both the e-commerce and enterprise-focused Amazon Web Services (AWS) segments. Also, the company’s continued cost cuts and other measures to increase profits - like raising prices for Prime subscriptions and the ad-supported tier; improvements in its logistics; and lowering the headcount - will help improve its profits and cash flows.
Its operating profit margins have already risen to the highest levels since early 2021, and there is scope for further margin expansion in the coming quarters. Amazon is also back to being a cash-generating behemoth after posting negative free cash flows in 2021 and 2022, and its trailing 12-month free cash flows stand at $21.4 billion.
Amazon is also a play on the resilience of the U.S. consumers, as the company said that its sales during the extended Thanksgiving weekend set a new record for the period. Plus, I believe that Amazon is an underappreciated AI play, as the technology should not only make its e-commerce platform more appealing for users by improving recommendations, but also help to lower costs structurally.
The stock trades at a next 12-month (NTM) price-to-earnings (PE) multiple of around 44x, which seems reasonable considering the growth prospects.
Why Is Wall Street Apprehensive About Alphabet?
Like Amazon, Alphabet (GOOG) shares also trade below their 2021 highs, even as the drawdown is not as deep. While the Google parent’s shares are up over 50% in 2023, it's still the second-worst performing FAANG stock of the year.
To be sure, there are valid reasons why at least a section of the market has been apprehensive about Alphabet. First, the company is battling a slowdown in the advertisement market, and rising competition from the likes of TikTok is not helping matters.
Also, most believe that Google might lose market share in the search market, as Microsoft (MSFT) has upped its game with AI-powered Bing – thanks to its association with ChatGPT’s parent company OpenAI. The general perception seems to be that Alphabet has lost at least round 1 of the AI war to Microsoft, whose shares recently hit all-time highs.
Finally, in Q3 2023, Alphabet’s cloud revenues trailed estimates, and the stock fell almost 10% after the earnings release to mark its worst session since the early days of COVID-19, even as its overall earnings were better than expected.
Why Is Alphabet Stock a Good Buy for 2024?
All of that said, I believe Alphabet stock looks like a good buy for 2024 for the following reasons:
- The company returned to double-digit growth rates in Q3 2023 after a gap of four quarters, and analysts also expect the company’s revenues to rise in double digits in 2024.
- Better monetization of Shorts and focus on the premium ad-free version of YouTube should help increase Alphabet’s profitability in the coming quarters.
- Markets might be a little too pessimistic on Alphabet’s AI business. While the company might lose some market share to Bing, it has other growth levers to offset that.
- Finally, Alphabet’s valuations look reasonable. It trades at a NTM PE multiple of 20.5x, which is lower than the five-year average - and its multiples are the second-lowest among FAANG peers.
Wall Street analysts are also bullish on Alphabet shares, and have given them a consensus rating of “Strong Buy.” The mean target price of $151.09 implies expected upside of 13% from current prices.
On the date of publication, Mohit Oberoi had a position in: AAPL , AMZN , META , NVDA , MSFT , GOOG . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
