Only three stocks so far have ever achieved a market capitalization of $3 trillion: Microsoft, Nvidia, and Apple.
Tremendous wealth has been created for some long-term investors in these companies -- only two countries (China and the United States) have gross domestic ducts greater than their combined worth today.
In recent years, artificial intelligence (AI) and other nology tailwinds have driven these stocks to previously inconceivable heights, and it looks the party is just getting started.
So, which stock will be next to reach $3 trillion. I think it will be Amazon (AMZN -0. 13%), and it will happen before the year is done. Here's why.
The next wave of cloud growth Amazon was positioned perfectly to take advantage of the AI revolution.
Over the last two decades, it has built the leading cloud computing infrastructure company, Amazon Web Services (AWS), which as of its last reported quarter had booked more than $110 billion in trailing-12-month revenue.
New AI workloads require immense amounts of computing power, which only some of the large cloud viders have the capacity to vide.
AWS's revenue growth has accelerated in recent quarters, hitting 17% growth year-over-year in Q1 of this year.
With spending on AI just getting started, the unit's revenue growth could stay in the double-digit percentages for many years. Its fit margins are also expanding, and hit 37.
5% over the last 12 months.
Assuming that its double-digit percentage revenue growth continues over the next several years, Amazon Web Services will reach $200 billion in annual revenue within the decade. At its current 37.
5% operating margin, that would equate to a cool $75 billion in operating income just from AWS.
Investors can anticipate this growth and should start pricing those expected fits into the stock as the second half of 2025 gresses. Image source: Getty Images.
Automation and margin expansion For years, Amazon's e-commerce platform operated at razor-thin margins.
Over the past 12 months, the company's North America division generated close to $400 billion in revenue but duced just $25. 8 billion in operating income, or a 6. 3% fit margin.
However, in the last few quarters, the fruits of Amazon's long-term investments have begun to ripen in the form of fit margin expansion.
The company spent billions of dollars to build out a vertically integrated dery network that will give it operating leverage at increasing scale.
It now has an advertising division generating tens of billions of dollars in annual revenue.
It's beginning to roll out more advanced robotics systems at its warehouses, so they will require fewer workers to operate. All of this should lead to long-term fit margin expansion.
Indeed, its North American segment's operating margin has begun to expand already, but it still has plenty of room to grow.
With growing contributions to the top line from high-margin revenue sources subscriptions, advertising, and third-party seller services combined with a highly efficient and automated logistics network, Amazon could easily expand its North American operating margin to 15% within the next few years.
On $500 billion in annual revenue, that would equate to $75 billion in annual operating income from the retail-focused segment. AMZN Operating Income (TTM) data by YCharts.
The path to $3 trillion Currently, Amazon's market cap is in the neighborhood of $2. 3 trillion.
But over the course of the rest of this year, investors should get a er picture of its fit margin expansion story and the earnings growth it can expect due to the AI trend and its ever more efficient e-commerce network.
Today, the AWS and North American (retail) segments combine to duce annual operating income of $72 billion. But based on these jections, within a decade, we can expect that figure to hit $150 billion.
And that is assuming that the international segment -- which still operates at quite narrow margins -- vides zero operating income.
It won't happen this year, but investors habitually price the future of companies into their stocks, and it will become increasingly that Amazon still has huge potential to grow its earnings over the next decade.
For a company with $150 billion in annual earnings, a $3 trillion market cap would give it an earnings ratio of 20. That's an entirely reasonable valuation for a such as Amazon.
It's not guaranteed to reach that market cap in 2025, but I believe investors will grow increasingly optimistic Amazon's future earnings potential as we gress through the second half of this year, driving its price to new heights and keeping its holders fat and happy.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brett Schafer has positions in Amazon.
The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia.
The Motley Fool recommends the ing options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.