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Few groups are as exclusive as the $1 trillion club. This club has only six members, each a U.S. company with a market capitalization of at least $1 trillion.
Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta Platforms are in the club now. All of them are artificial intelligence (AI) leaders. Here's the AI stock I think will be the next to join the $1 trillion club.
Next in?
I won't try to build up the suspense. Broadcom (NASDAQ: AVGO) is the AI stock I predict will be the next in line behind Meta, Amazon, and others with market caps of $1 trillion or more. However, I'm not arguing that Broadcom will be the next to achieve that milestone; it will just be the next AI stock to do so.
Berkshire Hathaway will probably top $1 trillion before Broadcom. Warren Buffett's conglomerate already has a market cap of over $900 million. I won't be surprised if Eli Lilly also reaches the threshold ahead of Broadcom thanks to soaring sales of its weight-loss drug Zepbound and type 2 diabetes drug Mounjaro.
However, the $1 trillion mark isn't out of reach for Broadcom. The semiconductor and infrastructure software maker's market cap currently tops $610 billion. Sure, the stock needs to jump another 64% or so. But considering Broadcom's shares have more than doubled over the last 12 months, delivering the required gain to join the $1 trillion club doesn't seem too tall a task.
Why Broadcom could beat Tesla and Taiwan Semi
Two other AI stocks are also contenders: Tesla (NASDAQ: TSLA) and Taiwan Semiconductor Manufacturing (NYSE: TSM). I think Broadcom will beat both to a $1 trillion market cap.
Tesla has a longer way to go than Broadcom does. The electric vehicle (EV) maker's market cap hovers around $520 million right now. Tesla also faces some major challenges.
Competition in China has intensified, causing Tesla to cut prices to avoid being outflanked. Big automakers in the U.S. are ramping up their EV production. Perhaps most concerning is that consumer interest in buying EVs seems to have stalled.
I suspect Taiwan Semi presents a greater threat to beat Broadcom to $1 trillion. The semiconductor maker's market cap is close to $620 billion, neck and neck with Broadcom's. Both companies should benefit from a strong continued demand for chips to power AI applications.
However, several rivals are attempting to reduce Taiwan Semi's market dominance. Mainland China's ambition to retake Taiwan could negatively impact Taiwan Semi stock as well as push U.S. and European customers to competitors.
Broadcom's risks seem relatively minor compared to those of Taiwan Semi. The company's acquisition of VMware should fuel accelerated growth. Broadcom's main problem is declining broadband sales and telecommunications companies reducing their spending.
Is Broadcom stock a buy?
Since I predict that Broadcom will be the next AI stock to join the $1 trillion club, do I also view the stock as a buy right now? Actually, no.
My concern with Broadcom is its valuation. Shares trade at nearly 29 times forward earnings. Yes, the company should generate strong growth over the next few years. Unfortunately, Broadcom's price still isn't compelling to me even with that growth factored in. I expect the company could take longer to reach a market cap of $1 trillion than many investors would like.
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