What if Santa Claus named his reindeer after stocks with market caps of $1 trillion or more? We wouldn't have, "Now, Dasher! Now, Dancer! Now, Prancer and Vixen! On, Comet! On Cupid! On, Donder and Blitzen!" Instead, jolly old Saint Nick would be calling, "Now, Apple! Now, Microsoft! Now, Nvidia and Amazon! On Alphabet! On Meta and Tesla!"
Just as Rudolph was a later recruit to Santa's reindeer team, two new members have just joined the $1 trillion club. And while neither has a shiny red nose, Wall Street thinks the prospects for one particular are especially bright.
Trillion-dollar newbies
The current $1 trillion club members share at least one common denominator: Each of them is heavily focused on artificial intelligence (AI).
Apple just introduced its Apple Intelligence generative AI capabilities. Microsoft partnered with OpenAI and has integrated GPT-4 throughout its products. Nvidia's GPUs are the gold standard for powering and training AI applications. Amazon and Alphabet, along with Microsoft, rank as the top three cloud infrastructure providers, and host large numbers of AI models. Meta Platforms uses AI extensively in its social media apps and developed the Lllama open-source AI model. Tesla's Autopilot self-driving feature is AI-powered.
The two newest members of the $1 trillion club are AI leaders, too. Broadcom (NASDAQ: AVGO) is a leading semiconductor company, and a growing proportion of the chips it sells are being used in AI. Taiwan Semiconductor Manufacturing (NYSE: TSM) operates the world's largest third-party semiconductor foundry, and manufactures chips for many top AI companies.
I predicted six months ago that Broadcom and Taiwan Semi would likely be the next companies to reach the $1 trillion mark. However, I didn't anticipate how quickly I'd be proven right. Taiwan Semi's market cap first briefly topped $1 trillion in mid-October, but it has dipped below and then rebounded above that level several times since (most recently, last week). Broadcom debuted in the $1 trillion club only a few days ago.
How Broadcom and Taiwan Semi racked up huge gains
Broadcom delivered an impressive performance in the first half of 2024 with its share price soaring by more than 40%. Analysts upgraded their recommendations for the stock and increased their price targets. Some investors were excited about the 10-for-1 stock split it conducted in July.
However, Broadcom's momentum stalled for several months. Then, the company provided its fiscal 2024 fourth-quarter update after the close of trading on Dec. 12. The stock exploded higher the next day, with its market cap edging past the $1 trillion mark. Investors especially loved that CEO Hock Tan said during theearnings call "[W]e see our opportunity over the next three years in AI as massive."
The first half of 2024 was even more impressive for Taiwan Semi. The stock skyrocketed nearly 70% as the company's business fired on all cylinders. It posted strong results in the first two quarters of the year. Good news from some of its biggest customers (particularly Nvidia) helped, too.
Management is also quite bullish about its AI opportunities. "We continue to observe extremely robust AI-related demand from our customers," CEO C.C. Wei said on the Q3earnings call He also noted that "almost every AI innovator" is working with Taiwan Semi.
Wall Street's favorite
Wall Street likes both of these $1 trillion AI stocks. Of the 43 analysts surveyed by LSEG in December who cover Broadcom, eight rated the stock as a strong buy, and 30 viewed it as a buy. Only 17 analysts surveyed by LSEG this month cover Taiwan Semi. However, four rated the stock as a strong buy, while 12 rated it as a buy.
But Broadcom's recent surge has left analysts' price targets in the dust. The average 12-month price target for the stock is now roughly 11% below the current share price. Meanwhile, the average analysts' price target for Taiwan Semi reflects an upside potential of roughly 13%.
For now, at least, Taiwan Semi appears to be Wall Street's favorite. I think both stocks, though, could keep up their winning ways in the new year.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
