The race to become the world’s first $4 TRILLION company – as experts reveal how the battle between US tech giants could affect you

Apple is leading a thrilling three-way battle to cross the $4 trillion mark for the first time. But with a current stock market valuation of $3.6 trillion, the iPhone maker is closely followed by microchip pioneer Nvidia, whose shares have had a tremendous run, driven by the boom in artificial intelligence (AI) spending.

It is now worth $3.3 trillion. Software giant Microsoft is hot on its heels with $3.1 trillion. To put these huge numbers into context, Apple is now the size of the entire annual output of the UK economy, with Nvidia and Microsoft close behind – see the table below.

They emerged from the group of so-called ‘magnificent seven’ stocks that increasingly dominate the US and global stock markets.

Together, the seven – including Google’s parent company Alphabet, online retailer Amazon, Facebook owner Meta and electric car giant Tesla – account for a third of the S&P 500 index of top US companies.

But the big three have pulled away from the rest of the field – so much so that Alphabet, their closest rival – is left with a valuation of ‘just’ $2.4 trillion.

All this matters because even if you don’t own these shares directly, UK savers are increasingly exposed to their fortunes – especially if they are invested in tracker funds, which track indices such as the S&P 500, or technology-focused investment funds.

So which of the trio will win the $4 trillion prize? Or could investors, who have enjoyed the ride, be heading for a decline?

Experts say it’s not ‘if’ but ‘when’ the milestone is reached, although there may be some heart-in-mouth moments along the way.

“The question of the first $4 trillion company may be a matter of time, but there are some signs of fatigue among investors caught up in the euphoria surrounding all things AI,” says Richard Hunter, main markets. at investment platform Interactive Investor.

“Based on current sentiment and prospects, it appears that Apple is the favorite to reach the milestone first, with Nvidia in second place and Microsoft as something of a dark horse.”

Of the three, Apple has had the slowest revenue growth and was also the slowest to embrace the artificial intelligence revolution.

“Apple’s journey with AI is a bit like the tortoise and the hare,” said Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdown.

Other companies have poured billions of dollars into AI without finding a clear path to making their massive investments profitable. Streeter therefore believes that Apple’s caution could pay off in the longer term.

“While Apple didn’t come first past the post in the AI ​​race, its cautious approach could ultimately be a smart move,” she adds.

For that to happen, Apple must continue to deliver features in its upgrades that capture users’ imaginations, otherwise future growth could stagnate, Streeter warns.

The recent rise in Apple stock prices has been driven by better-than-expected iPhone sales last quarter, as the first phase of AI features were rolled out. This was not without some glitches.

The AI ​​feature on Apple’s latest smartphone has generated inaccurate alerts or completely false claims when summarizing breaking news alerts.

It prompted the BBC to complain to Apple after one of its recaps claimed Luke Littler had won the World Darts Championship – hours before the final had started. (The Apple bot’s predictive power couldn’t be faulted, however, as Littler won the title.)

Many iPhone users have kept their older handsets as there have been fewer innovations in recent years, Streeter says.

She says “the big hope” is that there’s enough substance in the new AI features to keep customers upgrading regularly over the next few years, predicting: “If so, it would take the giant to this $4 milestone trillion can push.’

Dan Ives, analyst at asset manager Wedbush, said: “Rome wasn’t built in a day, and neither will Apple’s AI strategy. But the seeds of that strategy are being formed now and will transform the consumer growth story for years to come.”

Apple has a strong track record. It became the first publicly traded company to achieve a $1 trillion valuation in 2018, surpassing Amazon. The $2 trillion milestone was reached two years later, and in 2023 it became the first company to be valued at $3 trillion.

But Nvidia is making rapid progress amid the seemingly insatiable demand for its state-of-the-art AI chips.

It took 24 years for Nvidia to reach $1 trillion, but only nine months to double in size and just 96 days to get to $3 trillion last year.

Apple took 718 days to go from $2 trillion to $3 trillion, while Microsoft took 649 days. So Nvidia has valuable momentum.

“Nvidia has a technological advantage that makes it hard to beat,” Streeter said. “It not only dominates the market when it comes to chips used in AI systems, it has also developed platforms that allow users to optimize the hardware.”

But she questions whether Nvidia can continue at a breakneck pace, warning: “It still has to climb further than Apple.” Given its stratospheric growth through 2024 and the recent swing in its stock price, it could see more volatility this year.”

Interactive Investor’s Hunter agrees, saying, “There have been questions about whether the tens of billions of dollars invested in AI so far will be repaid and, even if they prove to be as profitable as some have predicted, over what period of time. this could happen.”

Nvidia is the most highly valued of the tech titans, raising fears that it will fall the furthest if performance doesn’t meet investor expectations. Expectations are so high that there is little room for error.

“Investors are assuming that Nvidia will show persistence,” said Howard Marks, billionaire co-founder of Oaktree Capital.

He notes that of the current “magnificent seven,” Nvidia may be “the sexiest,” but only Microsoft was in the top 20 of the S&P 500 at the height of the dot-com bubble a quarter-century ago.

It is also one of only six companies to boast this, while other tech companies such as Intel, Qualcomm and Cisco fell away.

Marks says that during bubbles, investors are willing to pay high prices for favorite stocks and behave as if the companies “will certainly remain leaders for decades.”

“Some do and some don’t,” he says. In other words, not all tech giants will stay the course.

You have been warned.