The 5 innovation-driven companies have the tools and intangibles needed to join the multitrillion-dollar luxury club before the decade begins.
Since the beginning of this decade, Wall Street’s major stock indexes have fluctuated between consecutive bear and bull markets. When volatility occurs, investors tend to seek the safety of the best-performing companies in the market. Last year, The Magnificent Seven did exactly the right thing.
Aside from a well-defined competitive advantage, these seven components have significantly outperformed the S&P 500 benchmark over the past decade. Today, all but one member of the Magnificent Seven has a market capitalization of $1 trillion. The all-important question is which companies will join the multitrillion-dollar luxury club next?
No one knows this answer for sure, but a strong argument can be made that the following five companies will reach $1 trillion by 2030.
1. Berkshire Hathaway: Current market capitalization of $904 billion
On track to record high after Warren Buffett’s conglomerate Berkshire Hathaway (BRK.A -0.28%) (BRK.B -0.31%) Even with the new value, it may not reach the glorious $1 trillion level until the end of 2024. Since becoming Berkshire’s CEO nearly 60 years ago, the man affectionately known as the “Oracle of Omaha” has led the company’s Class A shares (BRK.A) to annual returns of nearly 20%. .
Berkshire Hathaway’s incredible outperformance over its benchmark S&P 500 since the mid-1960s is due to Warren Buffett’s love of cyclical stocks, dividend payers, and portfolio concentration. This is thought to be due to three factors.
Regarding the former, Buffett and his top investment advisors Ted Weschler and Todd Combs are well aware that recessions are a normal and inevitable aspect of the U.S. economic cycle. But they never wanted to bet on America. This is because the growth phase lasts much longer than the economic downturn. Buffett and his team fill Berkshire’s $370 billion investment portfolio with cyclical companies that benefit from continued growth in the U.S. and global economies.
Second, Berkshire Hathaway’s investment portfolio includes well over 20 dividend stocks. A recently updated study by The Hartford Funds in collaboration with Ned Davis Research found that the average annual return for dividend payers was 9.17% over nearly 50 years (1973-2023), compared to 9.17% for publicly traded companies. It turned out that the annual return was a modest 4.27%. The company did not offer dividends. Companies that regularly return a portion of their profits to investors tend to be proven to be consistently profitable.
Finally, Warren Buffett and his team invested much of Berkshire’s investment capital in a relatively small number of companies. Berkshire owns 45 stocks and two index funds, but Berkshire’s top investment minds firmly believe that the company’s best investment ideas need more focus. These high-performing companies, including top-ranked Apple, have crushed the company in the long run.
2. Taiwan Semiconductor Manufacturing: $733 billion
The second innovative company likely to reach a market capitalization of $1 trillion by 2030 is Taiwan Semiconductor Manufacturing, one of the world’s leading chip manufacturers. (TSM 1.83%). As you can see from its current valuation, Taiwan Semi only needs a 36% increase from here to join his $1 trillion luxury club.
The obvious catalyst for Taiwanese semiconductors is the artificial intelligence (AI) revolution. The company is competing with many companies, including Nvidia, whose graphics processing units (GPUs) hold about a 90% share of AI-accelerated data centers, and Advanced Micro Devices, whose MI300X GPUs are poised to compete in this data center. is a leading manufacturing partner for top AI infrastructure providers with Nvidia’s H100 GPU.
Taiwanese cicadas should also benefit from technological advances outside of traditional technological areas. For example, next-generation vehicles are rapidly integrating new technologies. These cars will increasingly rely on advanced technology, and chipmakers like Taiwan Semi will be ideally placed to benefit.
According to Wall Street estimates, Taiwan Semiconductor’s earnings per share (EPS) are expected to increase by 81% between its 2023 reported value and 2027 estimate. Simply maintaining an expected profit multiple of 20 could comfortably lift this giant chip factory toward its $1 trillion plateau.
3. Broadcom: $621 billion
The third largest company whose valuation could reach $1 trillion before the start of the decade is semiconductor stock Broadcom (AVGO -0.15%) .
That doesn’t sound like a broken record, but much of the gains Broadcom shareholders made last year are tied to the company’s role in the AI revolution. Last April, Broadcom announced the Jericho3 AI chip, which can connect up to 32,000 powerful GPUs in high-computing data centers. This seamless connection is necessary to train large-scale language models and monitor generative AI solutions.
But Broadcom offers more than just driving sales through AI. The company’s foundation has long been wireless chips and accessories for next-generation smartphones. As wireless carriers upgrade their networks to support his 5G speeds, it triggered a multi-year shift for consumers and businesses to replace older devices with new devices that can take advantage of these faster speeds. This segment’s cash cow remains critical to Broadcom’s success.
Like Taiwan Semi, Broadcom is also benefiting from technological advances outside of traditional data centers. The company offers a wide range of automotive solutions, from advanced driver assistance systems and body electronics to enterprise software solutions that help large companies meet their key performance indicators.
Even if the AI bubble bursts by the beginning of his decade, Broadcom has the fundamental catalyst needed for other segments to weather the storm and emerge stronger.
4. and 5. Visa and Mastercard: $569 billion (Visa), $445 billion (Mastercard)
4th and 5th disruptors that could reach $1 trillion valuation by 2030 Companies include payment processors Visa (V -0.37%) and Mastercard (MA -1.40%). The reason I chose to discuss both companies together is because they share the same catalyst and have very similar operating models.
Visa and Mastercard are good examples of cyclical companies that benefit from long-term expansion (and both are holdings in Berkshire Hathaway’s portfolio). After World War II, only three of the 12 recessions lasted at least 12 months, while nearly all economic expansions during the same period lasted several years. Long-term growth means consumers and businesses will spend more, which is good news for paid payment processors like Visa and Mastercard.
Both companies are on a path to sustainable growth. Visa and Mastercard are not only the No. 1 and No. 2 credit card network purchases by value, respectively, in the world’s largest consumer market, the United States, but also organically expand their payments infrastructure into cash-strapped emerging markets. We also have the opportunity to expand. Through decades of acquisitions. These include the Middle East, Africa, and Southeast Asia.
Consciously avoiding loans is also definitely important to Visa and Mastercard’s success. Both companies would almost certainly succeed if they became lenders, but doing so would expose them to loan defaults and defaults during downturns. Because they focus solely on payment facilitation, they do not need to secure capital during times of economic instability. In other words, Visa and Mastercard tend to recover from economic downturns faster than most financial institutions.
Consensus EPS forecasts for 2027 project total earnings growth of 62% for Visa and 85% for Mastercard compared to what both companies reported in his 2023. If both companies can maintain double-digit EPS growth, each could join the exclusive $1 trillion club by 2030.
