Good morning.
Achieving a 13-figure market cap isn't easy. But could A.I. make it a bit easier?
Or has the bullishness over A.I. possibly inflated some of the biggest tech stocks to unsustainable levels? My colleague, Shawn Tully, examines how the so-called Trillion-Dollar Club is accounting for an even bigger share of the S&P 500—and how A.I. is playing a big role.
“The club’s five official, 13-figure-market-cap roster famously comprises Apple, Microsoft, Google parent Alphabet, Amazon, and new entrant Nvidia,” Tully writes. “For this analysis, I’ll add two former members that follow the club’s dynamics so closely they could still be wearing the embossed blazers: Tesla and Meta Platforms, formerly Facebook. We’ll nickname the expanded cast the Trillion Dollar Club–plus.”
Tully continues: “Investing history shows time and again that companies whose shares are pricey relative to the market eventually sink back to earth. So you’d think that folks and funds would be cycling out of these mostly mature tech superstars, which now offer half the earnings for every dollar invested versus the hundreds of other big-caps outside the manicured hedges.
“But the Club-Plus keeps catching booster rocket after booster rocket in an ascent driven more by momentum and hopes for the future of A.I. than what will really matter—its members’ ability to hit the increasingly lofty earnings targets implied by their stock prices.”
Nvidia posted a 6% gain to surpass the $1 trillion mark for the first time on May 30. “Generative A.I. drove significant upside in demand for our products,” EVP and CFO Colette Kress said on May 24 during the company’s earnings call for the period ending April 30.
Nvidia founder and CEO Jensen Huang said this week during the Cannes Lions Festival that generative A.I. will “supercharge” creators across industries and content types. Huang also mentioned the importance of A.I. being developed and deployed thoughtfully. “We have to put as much energy into the capabilities of A.I. as we do the safety of A.I.,” he said. “In the world of advertising, safety is brand alignment, brand integrity, appropriate tone, and truth.”
You can read more of Tully's report here and all about an investing trend that's dominated 2023.
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
