Today, only five companies have market capitalizations above the $1 trillion market -- Apple, Microsoft, Saudi Aramco, Alphabet, and Amazon. But the rise of artificial intelligence (AI) technologies is on track to open doors that allow new members to join this exclusive club. If you're looking for worthwhile investment opportunities in mega-cap companies with promising AI opportunities, read on to see why Taiwan Semiconductor Manufacturing (TSM 0.36%) and Meta Platforms (META 0.30%) both have strong odds of crossing the $1 trillion-valuation threshold by 2030.
Making the chips that push AI forward
Keith Noonan:Taiwan Semiconductor Manufacturing, also known as "TSMC," is a pure-play chip fabrication business. The company has built its specialized empire on top-tier fab capabilities, dependability, and trustworthiness -- and it will likely remain the preferred manufacturing partner for most high-end semiconductor designers for many years to come.
Based on recent estimates, TSMC was capturing approximately 58.5% of the global contract semiconductor fabrication market at the beginning of 2023. When it comes to the kind of high-performance chips that are used for artificial intelligence, intensive cloud computing, and graphics processing, its share is even more impressive, coming in at more than 90% of the global market.
TSMC's leading position in the fab space has it positioned to benefit from surging demand for AI-related chips. Consider that Nvidia's stock exploded recently after the company released guidance for huge growth in AI and data center revenue, and it's a key TSMC customer. For a hardware-oriented business, the Taiwan-based fabrication specialist also posts fantastic margins.
Last quarter TSMC recorded a gross margin of 56.3%, an operating income margin of 45.5%, and a net profit margin of 40.7%. While the company's business is subject to cyclical trends, the likelihood that it will enjoy significant demand tailwinds for advanced chips needed for AI applications suggests there's actually a good chance its margins will come in significantly above those already very strong levels.
Still down 27% from its all-time high, TSMC is now valued at roughly $535 million. With strong market positioning and demand catalysts related to AI now ramping up, the chip manufacturer has a clear path to hitting a $1 trillion valuation before this decade is out.
AI could help Meta Platforms keep people's attention
ParkevTatevosian: When you think of artificial intelligence, Meta Platforms may not be the first stock that comes to mind. Instead, Meta is known more as a social media company with billions of active users. That said, Meta is one of the companies that stands to gain the most from the rise of artificial intelligence. And with a market capitalization of $671 billion, it would not surprise me to see Meta Platform exceed a $1 trillion valuation by 2030.
META Market Cap data by YCharts
How will Meta Platforms benefit from AI? Primarily by improving the experience for the billions of active users of its apps, including Facebook and Instagram. Similar to how AI can effectively pick a song you might like after recognizing a pattern in previous songs you liked, Meta can use AI to highlight social media posts that interest you. As you may already know, Meta Platforms generates its money from advertising. The more you engage with the app, the more opportunity to show ads.
In the previous decade, Meta Platforms' revenue exploded from $7.9 billion to $117 billion. If Meta can effectively utilize AI to make the apps more engaging, it could deliver excellent, although perhaps not as prolific, growth over the next ten years. More importantly, Meta's business is highly profitable, with an operating profit margin of 25% in 2022. For that reason, I think Meta Platforms will be one top AI stock that could be worth more than $1 trillion by 2030.
These companies could join the trillion-dollar club
It's not a stretch to think that TSMC and Meta could earn trillion-dollar club membership cards by 2030. TSMC's market cap was previously as high as $730 billion, and Meta Platforms actually briefly had a valuation above the $1 trillion level.
Both of these companies continue to enjoy leading positions in their respective industries, and both look poised to benefit from some powerful AI-related tailwinds. If their respective artificial-intelligence initiatives pay off and the market enjoys some strong bullish stretches, it actually wouldn't be shocking to see either company with a market cap significantly above $1 trillion by the time 2030 rolls around.
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. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. Parkev Tatevosian, CFA has positions in Alphabet and Apple. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
