Nvidia Shares are up more than 180% since January 2024, with the stock accounting for nearly a quarter of the gains in Standard & Poor’s 500(SNPINDEX: ^GSPC) During that period. The company is now worth $3.4 trillion and should continue to benefit from the AI boom for many years to come. But public clouds may gain momentum in 2025.
Investments in AI infrastructure in the past two years will help cloud computing companies benefit as companies turn AI prototypes into products this year. This leaves room for Amazon(Nasdaq: AMZN) and alphabet(Nasdaq:Google)(NASDAQ:GOG) To exceed Nvidia’s current market cap before the end of 2025:
Amazon is currently worth $2.3 trillion. The stock would need to return 52% for its market value to reach $3.5 trillion. This means the stock price is $338.
Alphabet is currently worth $2.4 trillion. The stock would need to return 46% for its market value to reach $3.5 trillion. This means the stock price is $283.
Admittedly, both predictions are aggressive. But Bloomberg Intelligence estimates that AI spending will grow 71% in 2025, and Wall Street may be underestimating how much Amazon and Alphabet will benefit.
Amazon reported strong financial results in the third quarter, beating expectations at both top and bottom lines. Revenue rose 11% to $159 billion thanks to particularly strong sales growth in cloud and advertising services. Operating margin Expanded 5 percentage points to 9.8% Non-GAAP (GAAP) Earnings rose 52% to $1.43 per diluted share. Analysts expected profit growth of 21%.
Amazon could continue to beat estimates as AI spending increases. Amazon Web Services (AWS) accounted for 31% of public cloud spending in Q3, nearly 33% market share Microsoft The alphabet has been integrated. This scale is a major advantage. With more customers and partners, AWS is better positioned to monetize AI.
However, Amazon is also investing heavily in developing AI products. Dedicated AI chips, Trainium and Inferentia, provide a cheaper alternative to Nvidia’s graphics processing units (GPUs). Its Bedrock platform allows developers to fine-tune large pre-trained language models and build generative AI applications. Amazon Q’s conversational assistant helps programmers code, test, and deploy software.
Wall Street estimates that Amazon’s profits will rise by 26% over the next four quarters. This consensus makes the current valuation of 47 times earnings seem very reasonable. But the company’s profits could grow more quickly as demand for cloud AI services increases. This, in turn, could justify a higher valuation and push the company’s market cap to $3.5 trillion.
For example, if Amazon’s earnings grew by 35% in the next four quarters and its stock traded at 54 times its earnings (down from its peak of 62 times its earnings last year), its stock price would rise by 52% and its market cap would reach $3.5 trillion. . . However, Amazon is a worthwhile long-term investment even if the company fails to surpass Nvidia’s current market capitalization by the end of 2025.
Alphabet reported encouraging financial results in the third quarter, beating estimates at the top and bottom. Revenue increased 15% to $88 billion thanks to particularly strong sales growth in Google Cloud and modest growth in Google Services (ads). Meanwhile, GAAP net income rose 37% to $2.12 per diluted share. Analysts expected profit growth of 19%.
Alphabet may continue to achieve higher estimates as demand for cloud AI services increases. Google Cloud gained 2 percentage points in market share last year, while Microsoft lost 3 percentage points. Google’s investments in developing artificial intelligence products may continue this trend. More importantly, Google is the only company besides Amazon to deploy custom AI chips at scale, according to New Street Research.
More broadly, Google has a strong position in many AI product categories. Forster Research Recently recognized for its leadership in AI infrastructure solutions, machine learning platforms, and large base language models. In one report, analyst Mike Gualtieri called Google a better-positioned AI hyperscaler and said the company offers enough differentiation that it can win customers from other public clouds.
Wall Street estimates Alphabet’s earnings will increase 14% in the next four quarters, making its current valuation of 26 times earnings seem fair. But AI spending could lead to higher-than-consensus earnings, and the valuation multiple could expand once investors have greater clarity on the outcome of the antitrust case involving Google Search later this year.
Collectively, these tailwinds could help Alphabet surpass Nvidia’s current market cap by the end of 2025. For example, if earnings increase 25% over the next four quarters and the stock trades at 30 times earnings when that period ends, Its stock price will rise 46%. % The company’s value will be $3.5 trillion. However, Alphabet is a worthwhile long-term investment, even if my predictions don’t pan out.
Have you ever felt like you’ve missed out on your most successful stock buying journey? Then you’ll want to hear this.
On rare occasions, our team of expert analysts issues a “Double Bottom” stock. Recommendation of companies they think are about to emerge. If you’re worried about missing your opportunity to actually invest, now is the best time to buy before it’s too late. The numbers speak for themselves:
Nvidia:If you invested $1,000 when we doubled your money in 2009,You will have $352,417!*
apple: If you invested $1,000 when we doubled your money in 2008, You will have $44,855!*
Netflix: If you invested $1,000 when we doubled your money in 2004, You will have $451,759!*
We are currently issuing “double” alerts for three amazing companies, and there may not be another opportunity like this anytime soon.
Susan 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. Trevor Genuine He has positions at Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has Disclosure policy.
