Unveil the latest additions to the distinguished $1 trillion clan: Discover which company has captured Wall Street's admiration.
Unveil the latest additions to the distinguished $1 trillion clan: Discover which company has captured Wall Street's admiration.
What if Santa Claus named his reindeer after corporations with market caps over a trillion dollars? We wouldn't have, "Now, Dasher! Now, Dancer! Now, Prancer and Vixen! On, Comet! On Cupid! On, Donder and Blitzen!" Instead, jolly old Saint Nick would be calling, "Now, Apple! Now, Microsoft! Now, Nvidia and Amazon! On Alphabet! On Meta and Tesla!"
Just like how Rudolph was a more recent addition to Santa's team of reindeer, two new entities have recently joined the trillion-dollar club. And while neither of them possesses a glowing red nose, financial analysts have high expectations for one of the newcomers in particular.
Newcomers to the Trillion Dollar Club
The present members of the trillion-dollar club share at least one common trait: they all place a significant emphasis on artificial intelligence (AI).
Apple has just introduced its Apple Intelligence generative AI capabilities. Microsoft has partnered with OpenAI and has integrated GPT-4 throughout its products. Nvidia's GPUs are considered the best-in-class for powering and training AI applications. Amazon and Alphabet, along with Microsoft, rank among the top three cloud infrastructure providers, and host a vast number of AI models. Meta Platforms extensively uses AI in its social media apps and developed the Llama open-source AI model. Tesla's Autopilot self-driving feature relies on AI.
The latest additions to the trillion-dollar club are also dominant players in the AI sector. Broadcom (symbol: AVGO 0.25%) is a leading semiconductor company, and an increasing percentage of the chips it sells are designed for AI applications. Taiwan Semiconductor Manufacturing (symbol: TSM 3.49%) operates the world's largest third-party semiconductor foundry and manufactures chips for numerous top AI companies.
I predicted six months ago that Broadcom and Taiwan Semi would likely become the next companies to reach the trillion-dollar milestone. However, I did not anticipate how quickly I'd be proven correct. Taiwan Semi's market cap first surpassed the trillion-dollar mark for a short time in mid-October, but it's dipped below and then above that threshold several times since then (most recently, last week). Broadcom achieved membership in the trillion-dollar club just a few days ago.
How Broadcom and Taiwan Semi succeeded through massive growth
Broadcom had an exceptional first half of 20XX with its share price jumping by more than 40%. Analysts upgraded their recommendations for the stock and raised their price targets. Some investors were enthusiastic about the 10-for-1 stock split it performed in July. However, Broadcom's growth stagnated for several months. Then, the company provided its fiscal 20XX fourth-quarter update after trading hours on Dec. 12. The stock skyrocketed the following day, with its market cap briefly exceeding the trillion-dollar mark. Investors were particularly thrilled with CEO Hock Tan's comment during the earnings call that, "[W]e see our opportunity over the next three years in AI as massive."
The first half of 20XX was even more remarkable for Taiwan Semi. The stock gained nearly 70% as the company's business boomed. Strong performance in the first two quarters of the year and positive news from a few of its major clients (notably Nvidia) contributed to the impressive gains.
Management is also optimistic about Taiwan Semi's opportunities in AI. "We continue to observe extremely robust AI-related demand from our customers," CEO C.C. Wei said during the Q3 earnings call. He also mentioned that "almost every AI innovator" is collaborating with Taiwan Semi.
Analysts' Favorites
Analysts at Wall Street have a favorable view of both AI giants. Out of the 43 analysts covering Broadcom in December, eight rated the stock as a strong buy, and 30 viewed it as a buy. However, only 17 analysts cover Taiwan Semi this month, with four rating it as a strong buy and 12 rating it as a buy.
However, Broadcom's recent surge has left many analysts' price targets in the dust. The typical 12-month price target for the stock now stands about 11% below its current share price. Meanwhile, the average analysts' price target for Taiwan Semi reflects an upside potential of roughly 13%.
At the moment, at least, Taiwan Semi seems to be Wall Street's preferred pick. I think both stocks, however, have the potential to continue their winning streaks in the new year.
Investing in Broadcom or Taiwan Semiconductor Manufacturing could be a wise move, given their significant growth in the AI sector and the positive outlook from financial analysts. For instance, Broadcom's CEO mentioned a massive opportunity in AI for the company over the next three years.
Recent market trends show that both companies have surpassed the trillion-dollar market cap, with Broadcom joining the club just a few days ago and Taiwan Semi briefly reaching this milestone several times over the past few months. As a result, analysts have upgraded their recommendations for both stocks, with Taiwan Semi currently being Wall Street's preferred pick.