The Race to a $4 Trillion Market Cap: Apple, Nvidia, or Microsoft

Apple (AAPL -2.16%) became the first company to top a $1 trillion market cap in 2018. Today, it remains the largest company in the world by market cap, sitting around $3.6 trillion. But it has some company near the top of the mountain.

Nvidia (NVDA -2.81%) has seen its value soar higher amid the artificial intelligence (AI) boom. Its GPUs are essential infrastructure for companies training and running large language models. Its market cap currently sits just above $3.5 trillion as of this writing.

Meanwhile, Microsoft (MSFT -0.68%) managed to continue growing thanks to an early bet on generative AI leader OpenAI, which put its cloud computing business in an enviable position as developers and enterprises looked to take advantage of new AI capabilities. Its market cap sits at $3.1 trillion.

Because market prognosticators have a propensity for always searching out the next marker to hit, investors are likely seeing discussions about which of these companies could reach $4 trillion first (and stay there). Let's take a closer look at all three and see if an answer presents itself.

The case for Apple

Apple took the wraps off its AI features, dubbed Apple Intelligence, at its Worldwide Developers Conference in June. Unfortunately, all of those AI features weren't ready to go when the iPhone 16 launched in September. iPhone owners will get their first taste of Apple Intelligence at the end of October with more features coming out over the next six months or so.

Apple Intelligence includes some compelling promises that could make the iPhone a much more powerful device for productivity, communication, creativity, and general life management. But there's a big catch. It's only available on newer iPhones: the iPhone 15 Pro, iPhone 15 Pro Max, and the complete iPhone 16 lineup. As such, hundreds of millions of iPhone owners will have to upgrade their devices to get access to Apple Intelligence.

The interest in AI could lead to a so-called "super cycle," driving record sales of the iPhone. Wedbush analyst Dan Ives thinks Apple could sell 240 million iPhones in fiscal 2025. Apple's already seeing relative strength in China compared to last year, and the early data from the U.S. launch were mostly positive. But it's likely to play out over the course of the year, if not longer.

A stronger-than-expected upgrade cycle and progress toward direct monetization of AI features could propel Apple's stock to the $4 trillion level. At its current price of 31.5 times analysts' consensus estimate for 2025 earnings, the stock trades at a premium to the overall market. Apple certainly deserves a premium given its massive free cash flow generation and share repurchase program. But Apple likely needs to outperform single-digit percentage revenue growth expectations for next year to justify a $4 trillion valuation.

The case for Nvidia

No company has benefited more from the outsized interest in AI than Nvidia. Big tech companies are buying up Nvidia's high-end GPUs as fast as they can package them, and it doesn't look to be slowing down anytime soon. CEO Jensen Huang recently said demand for its next-generation Blackwell chips is "insane."

That's supported by strong recent earnings results from its manufacturing partner, Taiwan Semiconductor Manufacturing (TSM 1.20%). TSMC expects fourth-quarter revenue to climb 35% year over year with expanding profit margins due to higher utilization of its more advanced processes. Those processes are used by Nvidia, among others, to make cutting-edge chips. TSMC also expects to spend more on capital expenditures in 2025, indicating it sees strong demand growth continuing into next year.

Nvidia's revenue is heavily reliant on just a few big companies. And those companies will be under pressure to show positive returns on their massive investments in AI data centers, including Nvidia's chips. As it stands, though, Nvidia's chips remain the best option for most of the big tech companies competing in the AI space. They simply can't afford to not buy the GPUs, as it could result in falling behind the competition.

Nvidia's current share price is about 35 times analysts' consensus expectations for next year's earnings. That's a big premium to the market, but analysts' true expectations appear to be even higher than what's printed. (After all, Nvidia's stock price has dropped in the past after the company beat expectations and provided a strong outlook.) As such, Nvidia's true multiple may be lower relative to true expectations, but it also means it must outperform significantly in order to reach the $4 trillion level.

The case for Microsoft

Microsoft's early investment in OpenAI established it as a leader in artificial intelligence. Specifically, developers looking to make use of foundation models, including OpenAI's GPT, were drawn to Microsoft's cloud platform, Azure, and its capabilities.

Azure has been a growth story for Microsoft for a long time, but its growth is accelerating amid the AI boom, despite its already massive size. Azure revenue grew 29% year over year in the company's fourth quarter, faster than any of the competing public cloud providers.

Importantly, that growth looks like it will continue. Management says it expects Azure's revenue growth to accelerate in the second half of the current fiscal year as it brings its capital investments of the last few quarters online. Microsoft spent $44.5 billion in capital expenditures in 2024, up 58% from the year before.

Microsoft is also integrating AI capabilities into its market-leading enterprise software, including Office 365. Its Copilot software is growing quickly, with total customers across all of its platforms increasing 60% sequentially in the fourth quarter. There's a lot of room left to grow, too, as Microsoft counted over 400 million Office 365 seats at the end of last year, and it continues to grow at a high single-digit-percentage rate every quarter.

Microsoft stock currently trades for about 32 times analysts' consensus 2025 earnings estimate, but it arguably deserves an even higher multiple as it represents the best way to play both sides of the AI coin: infrastructure and software. Its massive free cash flow from enterprise software supports reinvestment in Azure and a healthy buyback. Margins should improve over time, too, as both Azure and Copilot scale, which combined with healthy revenue growth and share buybacks should result in substantial earnings growth. Microsoft looks most likely among the three tech giants to outperform expectations, which will push it much closer to the $4 trillion milestone.

Who will win the race?

Microsoft looks most attractively priced in today's market, but it's also the furthest away from $4 trillion at this point. With a market cap of $3.1 trillion, the stock would have to climb about 29% to reach the milestone. While Microsoft's price multiple (or earnings estimates) may expand over the next few quarters as the market recognizes the attractive price, it might not be the first to $4 trillion. Still, I'd argue it's the best of the three to buy right now.

As for who reaches $4 trillion first, Nvidia and Apple are neck and neck. Either company could hit $4 trillion in just a few months if the market cooperates and they provide good earnings data or outlooks.

Apple is the safer bet to get there eventually, but Nvidia could certainly beat it to the punch if big tech reports positive earnings results with bigger-than-expected capital expenditure budgets for 2025. Nvidia could just as easily see its stock price fall considerably lower with just one bad data point in its earnings. That makes it a much riskier bet to reach and stay above the $4 trillion milestone.