Meet the Supercharged Growth Stock That’s an Opportunity to Join Microsoft, Apple, Nvidia, and Alphabet in the $2 Trillion Club

Artificial intelligence (AI) is one of the major long-term tailwinds that has emerged over the past two years. Although AI has been around in one form or another for decades, more recent advancements have shaken up the world of technology.

The evidence abounds. Indeed, the world’s four largest companies – measured by market capitalization – all share a common thread: They are all buying into the groundswell surrounding generative AI and rushing to profit from these cutting-edge algorithms. At the top of this list is Microsoft, the only company with a market capitalization exceeding $3 trillion. Follow closely behind Apple, NvidiaAnd Alphabetwith a market capitalization between $2.9 trillion and $2.1 trillion.

A company that seems destined to join the ranks of the $2 trillion club is Metaplatforms (META -0.05%). The social media titan has a trove of data on its users and is mining its data cache for profits.

Let’s examine Meta’s place in the overall AI ecosystem and the drivers that could propel its stock to rarefied heights, thereby making it part of this prestigious group.

Data is the new oil

In 2006, British mathematician Clive Humby declared that “data is the new oil.” In other words, data in its raw form must be refined so that it can reach its greatest potential. Recent advances in the field of generative AI have given new meaning to this oft-quoted phrase.

AI models are trained on reams of data, allowing them to make more accurate predictions and improve their decision-making process. Therefore, companies with the most data can create the most effective AI systems.

This is what gives meta-platforms an advantage in the AI ​​revolution. The company has a roster of social media platforms, including three of the four largest social media platforms on the planet (measured by monthly users), including Facebook, Instagram, and WhatsApp, among others. In the first quarter, more than 3.2 billion people connected to one of the company’s families of applications. This gives the company access to a virtual treasure trove of data about its users, which is the primary fuel for training AI models.

The result of these efforts is LLaMA (Large Language Model Meta AI), which underpins the company’s flagship product, Meta AI. Last month, the company unveiled LLaMA 3, making Meta AI “one of the world’s leading AI assistants.” This AI is free to users (which results in more data), although Meta charges large cloud infrastructure providers a fee to include it in their offerings.

The Generative AI Opportunity

As the world’s largest social media provider, it may seem counterintuitive that meta-platforms would be interested in AI, but it seems like too good an opportunity to pass up. By simply reusing the data it already has, Meta can generate a whole new revenue stream, enriching shareholders.

Estimates of the scale of opportunities presented by AI are all over the place, so there is no definitive number. However, one of the most conservative estimates suggests that generative AI will be a $1.3 trillion market by 2032, according to data compiled by Bloomberg Intelligence. With an opportunity of this magnitude, it’s easy to see why Meta took this path.

A history of robust growth

Over the past decade, Meta’s revenue has grown 3,120% (as of this writing), while its net profit has jumped 4,000%. Although it hasn’t been a straight line, the company’s performance has been consistent, leading to dramatic growth in its stock price, which jumped 1,140%. These results were fueled by Meta’s digital advertising, which generates the lion’s share of its revenue.

In the first quarter, Meta’s growth was impressive. Revenue of $36.5 billion jumped 27% year over year, while its diluted earnings per share of $4.71 soared 114%. Visitors to its platforms increased by 7%, helping to fuel its ad impressions, which increased by 20%, while the average price per ad increased by 6%. The robust growth in financial results was driven by a slower increase in costs and expenses, which increased by only 6%.

Meta has developed a host of generative AI features to help its advertisers better reach their target market. For example, users can create multiple backgrounds, adjust the size of the main image, and create variations on the original text, which can save advertisers time and money. This, combined with the current recovery in the advertising market, is good news for Meta.

Even though AI is getting a lot of attention, there are other potential growth drivers that could push Meta higher. Meta’s Reality Labs, which include the company’s Quest virtual reality (VR) headsets and its Metaverse ambitions, have held back Meta’s results so far. However, CEO Mark Zuckerberg believes that ongoing investments in Reality Labs will ultimately increase Meta’s operating profit, although this remains to be seen.

The path to $2 trillion

Meta currently has a market cap of around $1.22 trillion, meaning it will only need price gains of around 65% to increase its value to $2 trillion. According to Wall Street, Meta is expected to generate $146.2 billion in revenue in 2024, giving it a forward price-to-sales (P/S) ratio of around 8. Assuming its P/S remains constant, Meta is expected to increase its turnover. revenue at around $241 billion per year to support a market capitalization of $2 trillion.

Wall Street currently projects Meta’s annual revenue growth of 28% over the next five years. If the company reaches this criterion, it could reaching a market cap of $2 trillion as soon as 2027. It’s worth noting that Meta has a history of outperforming analyst expectations. If so, this line could be crossed sooner.

It’s worth noting that the economy remains a wild card and sentiment remains driven by inflation and the possibility of interest rate cuts. If macroeconomic conditions remain sluggish, or even turn south, advertising revenue could take a hit and Meta could suffer.

That said, 27 times earnings equals the price-to-earnings ratio of S&P500 and a relative bargain given Meta’s growth track record.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Danny Vena holds positions at Alphabet, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool holds positions and recommends Alphabet, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.