Meta Returns to the Trillion-Dollar Market Cap Club!Who Will Be Next?

Entering 2024, artificial intelligence is still the "ammunition" that dominates the earnings reports of technology companies.

With more than half of the current round of U.S. stock earnings season, Apple, Microsoft, Google, Amazon, Tesla, Meta Platforms, one of the "Big Seven" of U.S. stocks have disclosed their fourth-quarter results.

From the perspective of stock prices, this year, the collective rally of the "Big Seven" of U.S. stocks based on the artificial intelligence boom has been broken, among them, Microsoft's market value has surpassed Apple, Meta and Nvidia have joined hands to soar, and Amazon and Microsoft have risen steadily.

The stock price performance of the Big Seven over the past 6 months

From the perspective of market capitalization, with the gradual disclosure of the fourth-quarter results, the "trillion market value club" of U.S. stocks has also been reshuffled.

Microsoft, the world's most valuable company, continues to widen the gap with Apple, standing firmly above $3 trillion after the results, compared to Apple's $287 million.

Amazon's market capitalization surpassed Google to become the third most valuable company in the United States, the first time since September 2022.

Meta's market capitalization soared by $200 billion overnight, and its latest market capitalization was $1.2 trillion, setting a new record.

Tesla has begun to "fall behind" and has fallen out of the "Big Seven", and its market value has been overtaken by Warren Buffett's Berkshire and Eli Lilly, a manufacturer of "diet pills".

The post-performance performance of these tech giants also highlights that the focus of the market is beginning to shift towards concrete results in the AI hype, with Art Hogan, chief market strategist at B Riley Wealth, saying that let's turn the calendar to 2024, which is the year to "prove yourself" – tech companies must prove not only their ability to use AI, but also their ability to "monetize" AI. As a result, some of Apple's aura has faded.

In addition, the earnings reports of these tech giants will reveal an important message: to win the battle of AI, you must spend money before you can make money. The continuous investment plan of enterprises in artificial intelligence has also become one of the important factors to boost market confidence.

It is worth noting that since this year, there has been some voice in the market about the replacement of the portfolio of US stock giants. In particular, the recent plunge in Tesla's stock seems to have begun to threaten its position in the giant portfolio.

In fact, the "nickname" of the U.S. tech giants has never been static.

Before the term "Big Seven" became widely popular, there was also the term FANG, which originally referred to Facebook, Amazon, Netflix and Google, and later the FAANG portfolio including Apple, and even in the Internet boom of the late 90s of the 20th century, investors once flocked to the so-called "Four Horsemen" of US stocks - that is, Cisco, Intel, Dell and Microsoft.

Therefore, the market has recently begun to think, who is expected to advance into the trillion market value club? Who else can "replace" Tesla among the US technology stocks?

Who is poised to become the next trillion dollar club?

Judging from the top ten companies in the current U.S. stock market capitalization, in addition to Tesla, which has been among the trillion market value club, Warren Buffett's Berkshire, "diet pill" manufacturer Eli Lilly, and global chip foundry giant $TSMC (TSM. US)$ may be expected to become the next member.

Among them, Berkshire's share price quietly hit a new high of $589,900 a share on Friday, and its recent rise was due to several factors: Apple's new rally, strong insurance business, and strong fourth-quarter results.

Analysts expect Berkshire's fourth-quarter operating profit to rise about 18 percent, with Class A earnings per share of $5,717, according to FactSet data.

UBS analyst Brian Meredith gave a higher forecast, expecting earnings per share of Class A shares to be around $6,747 and expecting earnings per share of Class A shares to be close to $28,000 in 2024.

Notably, Barron's selected Berkshire as its top pick stock for 2024 at the end of 2023. According to Wall Street's expectations, the highest price target for Berkshire Class A shares is $655,000, implying an 11% potential upside for Berkshire.

In addition, Eli Lilly's share price has performed strongly on the back of strong demand for new weight loss drugs, with its share price nearly doubling in the past year, highlighting that there are other themes besides artificial intelligence that are fueling investor enthusiasm.

With Mounjaro, a diabetes treatment, and Zepbound, a weight loss drug, Eli Lilly's stock price has soared 80% in the past year, making it the world's largest healthcare company by market capitalization. However, it is worth noting that Eli Lilly's market capitalization flow password is not only tirpatide, but also the successful research and development of donanemab, a new drug under development in the field of Alzheimer's disease (AD).

The Norwegian Wealth Fund, the world's largest sovereign wealth fund, had optimistically predicted that Eli Lilly would be on track to become one of the first healthcare industry members of the trillion-dollar club.

In addition, TSMC achieved a net profit of NT$238.7 billion in the fourth quarter, down 19% year-on-year but up 13% quarter-on-quarter, and achieved revenue of NT$625.5 billion, both exceeding expectations, driving the stock price higher. Although TSMC's stock price has not yet returned to its all-time peak in 2022, Wall Street analysts are optimistic about its prospects.

Amir Anvarzadeh, a strategist at Asymmetric Advisors, said the share price could extend its rally further due to TSMC's current low valuation, coupled with the company's better-than-expected sales prospects, as well as potential pricing increases.

Given its undisputed dominance in the production of AI chips, TSMC could eventually explode.

Who else in the U.S. tech stock can "replace" Tesla?

Brandon Michael, senior investment analyst at ABC Funds, said that the current pattern of U.S. stocks seems to be more like the "Big Six". He pointed out that Tesla is facing a lot of problems, including competition from Chinese electric car makers, price cuts, shrinking profit margins, and even Musk himself has admitted that the Dojo supercomputer is a distant target.

So who is expected to "replace" Tesla as the next tech giant has become one of the most concerned things in the market.

Many investors said that the next giant to "take over" Tesla is likely to be a company that has successfully monetized the booming momentum of AI.

American communications chip giant Broadcom is a popular option.

From the perspective of market capitalization, Broadcom is currently second only to Tesla in the global enterprise market capitalization list, with a market value gap of only about $24 billion.

ABC Funds' Michael said Broadcom would be the main contender, with the company having doubled its market value in the last year, while traders are betting that the company's recent move to acquire VMware will provide a further boost. If I had to pick another Big Seven company, it would be Broadcom, a leader in custom chips that is driving the AI revolution, the analyst said.

In fact, Broadcom's strong performance last year also made most Wall Street analysts bullish, and believe that the company is likely to be another company to benefit from the need for AI infrastructure after Nvidia. Even many analysts shouted that Broadcom is the next Nvidia.

In addition to Broadcom, another nominated company is the "darling" of the U.S. stock market - Supermicro Corporation. Chris Beauchamp, chief market analyst at IG Group, said that while AMD's market capitalization pales in comparison to Tesla's, it may still stand out because it is another big beneficiary of the current AI revolution.

In addition, some analysts even called for forgetting about the "Big Seven" and embracing the era of "MnM". Josh Beck, an analyst at investment bank Raymond James, said the popular club for tech stocks could be "MnM". Beck explains,

His MnM refers to Microsoft, Nvidia and Meta, three big tech companies that will be leaders in the AI era. As the backbone of the AI boom, the status of Microsoft and Nvidia is needless to say, and Meta can be in this elite camp because of its latest performance.

Brian Nowak, an analyst at Morgan Stanley, wrote in a note on Friday that "solid execution, faster growth and improved capital structure efficiency will improve Meta's outlook for the future." ”