Nvidia (NASDAQ: NVDA) has been one of the best stocks to profit off the artificial intelligence (AI) boom over the last two years. Shares of the AI chip leader have surged more than 820% since 2022 and currently have of a market cap of nearly $3.3 trillion -- trailing only Apple's $3.5 trillion.
The following "Magnificent Seven" stocks are not far behind and could deliver exceptional returns in the next few years to join Nvidia and Apple in the $3 trillion club.
1. Amazon
Amazon (NASDAQ: AMZN) shares have delivered life-changing returns to investors over the last few decades and continue to generate market-beating gains. The stock has doubled over the last five years, bringing its total market cap to $2 trillion. Based on the company's opportunities, the shares could climb another 50% in the next few years to reach $3 trillion in total market value.
When you deliver billions of orders each year, every last mile of cost adds up. Amazon was able to reduce the cost to serve retail customers in 2023 for the first time since 2018. It continues to find ways to strip costs out of the retail business. The company's operating profit has doubled over the last year, as it shortens and optimizes delivery routes.
Reducing costs can benefit Amazon more than simply boosting its short-term profitability. It also can allow Amazon to gain market share in online shopping by lowering prices on select goods. Shortening transportation distances also means customers receive their orders faster, and that can lead to more frequent shopping.
Amazon says it has plenty of opportunities to reduce costs by using automation and robotics and continuing to build its same-day delivery network. The company already controlled 37% of the U.S. e-commerce market in 2023 -- 6 times the share of No. 2 Walmart, according to Statista. Amazon's efforts to improve efficiencies and speed up order delivery show a relentless competitor continuing to look for ways to protect and stretch its lead. This is the kind of business you want protecting and growing your savings for retirement.
Analysts expect earnings to reach $7.30 per share by 2026, an increase of 52% over 2024 estimates. Amazon investors can expect the stock to climb along with that increase and reach a $3 trillion market cap within two years.
2. Alphabet (formerly Google)
Shares of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) also doubled in the last five years. The company's market cap is currently hovering around $2 trillion, putting it within striking distance of Nvidia's market value.
While Amazon Web Services is the leading cloud service provider for enterprises, many businesses prefer Google Cloud. Google has been steadily gaining share of the cloud market in recent years. New AI services offered in Google Cloud are fueling its momentum.
The company credited strong demand for AI infrastructure and generative AI services for driving recent growth in the cloud. Google Cloud's revenue grew to more than $10 billion in the second quarter, but equally important, the segment's operating profit nearly tripled to surpass $1.1 billion last quarter. This shows Alphabet is earning a high return on investment on AI tools offered to Google Cloud customers like Vertex and the Gemini AI model.
It's also impressive that Alphabet can make the necessary investments to drive strong demand for cloud services and AI while producing solid earnings growth. Earnings grew 31% year over year in Q2, and analysts expect Alphabet's earnings to grow 16% over the long term.
By 2026, the consensus estimate has Alphabet's earnings reaching $10. If Alphabet earns a market average price-to-earnings ratio of around 27, the shares could be worth $270, implying upside of 62%. It could easily hit a $3 trillion market cap in two years.
Should you invest $1,000 in Amazon right now?
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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. John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Nvidia, and Walmart. The Motley Fool has a disclosure policy.
2 Stocks That Could Join Nvidia in the $3 Trillion Club was originally published by The Motley Fool