Prediction: 2 Artificial Intelligence (AI) Stocks Will Be Worth More Than Nvidia by 2029

Artificial intelligence rockstar Nvidia currently has a market capitalization of $2.9 trillion, but the chipmaker has flitted back and forth around $3 trillion for several months. Only two other publicly traded U.S. companies have crossed that threshold: Apple and Microsoft.

Looking ahead, Amazon (AMZN 3.71%) and Alphabet (GOOGL 0.99%) (GOOG 1.05%) could surpass Nvidia’s current valuation to become $3 trillion companies by 2029. What that means for shareholders is detailed below.

• Amazon currently has a market capitalization of $1.9 trillion. Reaching $3 trillion by 2029 implies a total return of 58%, which equates to 10.7% annually over the next 4.5 years.
• Alphabet currently has a market capitalization of $2 trillion. Reaching $3 trillion by 2029 implies a total return of 50%, which equates to 9.4% annually over the next 4.5 years.

Here’s what investors should know about Amazon and Alphabet.

1. Amazon

Amazon has three important growth engines in e-commerce, digital advertising, and cloud computing. Specifically, it runs the most popular online marketplace in the U.S. in terms of visitors, and it accounts for 41% of domestic retail e-commerce sales. The company also has a vast logistics network that supports fulfillment services for sellers and rapid delivery for buyers, which reinforces its leadership position.

Amazon is the third-largest ad tech company in the world, but it dominates retail media, a term that refers to digital advertising services provided by retailers. That matters because retail media is one of the fastest-growing verticals in the digital ad market, according to eMarketer. Additionally, Amazon recently unlocked a new revenue stream by introducing advertising on Prime Video.

Finally, Amazon Web Services (AWS) is the largest public cloud, and its market share rose one point to 32% in the June quarter. Those share gains reflect aggressive investments in artificial intelligence (AI) services. “During the past 18 months, AWS has launched more than twice as many machine learning and generative AI features into general availability than all of the other major cloud providers combined,” CEO Andy Jassy recently told analysts.

Going forward, eMarketer estimates U.S. retail e-commerce sales will grow at 9% annually through 2028, while retail media spending climbs at 24% annually during the same period. Meanwhile, the International Data Corp. (IDC) expects public cloud spending to compound at 19% annually through 2028. That gives Amazon a good shot at double-digit sales growth over the next 4.5 years.

Here’s how that could earn Amazon a $3 trillion valuation by 2029: Today, the company is worth $1.9 trillion. Revenue could reasonably increase at 12% annually through the end of 2028, in which case the company would hit $3 trillion in market value if shares traded at 3 times sales, a slight discount to its current valuation of 3.1 times sales.

2. Alphabet

Alphabet has two important growth engines in digital advertising and cloud computing. The company owns six products that serve more than two billion monthly users. Chief among them are the most popular streaming video platform (YouTube) and leading internet search engine (Google Search). Those platforms let Alphabet efficiently collect information and deliver data-driven advertising to consumers.

Alphabet will account for 27.4% of global digital ad spending this year, per eMarketer. That puts the company more than five percentage points ahead of Meta Platforms, the second largest digital advertiser in the world. Importantly, while Alphabet is losing share across the open internet, dominance in internet search and streaming video should keep it ahead of the competition for the foreseeable future.

Meanwhile, Google Cloud is the third-largest public cloud, and its market share increase one point to 12% over the past year. Those share gains reflect its status as a leader in AI infrastructure solutions and large language models. “Year to date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues, and are being used by more than 2 million developers,” CEO Sundar Pichai told analysts on the second-quarter earnings call.

Going forward, eMarketer estimates global digital ad spending will grow at 10% annually through 2028, and the IDC expects public cloud spending to compound at 19% annually during the same period. That gives Alphabet a good shot at double-digit revenue growth over the next 4.5 years, with potential upside from its subsidiary Waymo, a company that operates an autonomous ride-hailing network in several U.S. cities.

Here’s how that could earn Alphabet a $3 trillion valuation by 2029. The company currently has a market capitalization of $2 trillion. Revenue could reasonably grow at 10% annually through the end of 2028, in which case the company would hit $3 trillion in market value if shares traded at 6 times sales, a modest discount to its current valuation of 6.4 times sales.