One of the most notable changes over the past few decades has been the rise of technology companies among the world’s most valuable companies. Just 20 years ago, industrial and energy giants General Electric and ExxonMobil topped the list with market capitalizations of $319 billion and $283 billion, respectively. Now, just 20 years later, technology companies dominate the list.
Leading the way are three of the world’s most well-known tech companies: Apple currently leads the way with a market cap of $3.4 trillion, followed by Microsoft and Nvidia, each with a market cap of $3 trillion.
With a market capitalization of just $1.3 trillion, Meta Platform (Nasdaq: META) The company is on track to join the $3 trillion club, but its stock price is up 163% in the past year and 495% in the past five (as of the time of writing), so it’s likely to continue to perform well.
Meta has some clear advantages and its ever-expanding social media empire, market power, and strategic adoption of AI could help it join this elite group.
Continued and Strong Recovery
Meta Platforms was hit hard by the economic downturn, but its stock price bounced back thanks to stellar performance: second-quarter revenue of $39 billion, up 22% year over year, and diluted earnings per share (EPS) of $5.16, up 73%.
The performance was driven by strong user metrics: the number of daily visitors to Meta’s social media sites (including Facebook, Instagram, Threads and WhatsApp) reached 3.27 billion, up 7% year-over-year.
Underpinning the strong performance is the continued recovery of online marketing, which is improving thanks to overall economic growth, with Meta’s social media ecosystem acting as host for the company’s digital advertising.
The online advertising space is dominated by two industry leaders: Alphabet Inc.’s Google will command an estimated 39% of global digital ad revenue in 2023, followed by Meta with 18%, according to data compiled by business intelligence platform Statista.
As the world’s second largest digital advertiser, Meta Platforms is well positioned to benefit significantly from the recovery.
Multiple growth drivers
According to advertising industry research firm WARC Media, global advertising spending is expected to grow 8% to surpass $1 trillion in 2024. The report said social media is expected to be the fastest growing medium for digital advertising, accounting for about 22% of total ad spending. Additionally, Meta is “expected to record significant gains in the coming months.”
The story continues
But Meta’s strategy goes beyond advertising: it’s about capitalizing on the exponential growth in artificial intelligence (AI). The company has used data collected from billions of users across its social media platforms to develop its own cutting-edge, large-scale language models, which form the basis of its generative AI.
The result was Llama (a large-scale language model called Meta AI), which informs the company’s flagship product, the Meta AI chatbot. Earlier this year, the company announced Llama 3, declaring Meta AI “one of the world’s leading AI assistants.” The company offers the system for free to individual users (who collect more data), while charging the largest cloud infrastructure providers for the rights to incorporate it into their services.
Despite the emphasis on AI, it’s not the only growth driver driving Meta’s stock price. Meta’s Reality Labs, home to its Oculus virtual reality (VR) business, Quest VR headsets and ever-changing Metaverse blueprint, has seen little success in its efforts so far. But CEO Mark Zuckerberg is confident those investments will pay off and ultimately boost Meta’s profits.
Given the recovery of the advertising market, multiple growth drivers, and tailwinds driving generative AI, it won’t be long before Meta Platforms becomes a member of the $3 trillion club.
The Path to $3 Trillion
Meta’s market cap is currently around $1.35 trillion, and its stock price would need to rise by around 123% to reach a market cap of $3 trillion. According to Wall Street, Meta is expected to generate revenue of $161.6 billion in 2024, giving it a forward price-to-sales multiple (P/S) of around 8.3. Assuming the P/S remains constant, Meta would need to grow revenue to around $360 billion per year to support a market cap of $3 trillion.
Wall Street currently projects Meta to grow revenue at 14% annually over the next five years. If the company achieves this goal, its market cap could reach $3 trillion by 2031. These projections may well be conservative, as Meta has grown its annual revenue by nearly 1,000% over the past decade.
Moreover, Meta trades at a discounted price-to-earnings ratio of 27 compared with 29 for the S&P 500. That’s an attractive price for a company with dominant market share, strong momentum and multiple ways to win.
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Randi Zuckerberg is a former director of market development and spokeswoman for Facebook and the sister of Meta Platforms CEO Mark Zuckerberg. She is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has invested in and recommends Alphabet, Apple, Meta Platforms, Microsoft, and NVIDIA. The Motley Fool has invested in and recommends Alphabet, Apple, Meta Platforms, Microsoft, and NVIDIA. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Here are the hyper-growth stocks that could join Apple, Microsoft, and Nvidia in the $3 trillion club by 2031. This was originally published by The Motley Fool.
