Nvidia, Tencent in race for next place in trillion-dollar club

The technology industry represents five of the six existing members and could well be the spawning ground for the next. But there is competition. Commodity supercycles, the global push for clean energy and biotechnology development could all produce candidates.

This is an important point. Club membership not only earns bragging rights for the likes of Elon Musk and Jeff Bezos, but it also makes it difficult for investors beyond Wall Street to ignore companies. This could bring some welcome stability to stocks like Tesla, which will further increase their attractiveness.

The most immediate competition is between Nvidia Corp and Tencent Holdings Ltd. Chipmaker Nvidia is touted as the big winner in the future of gaming and machine learning, thanks in part to the market-leading computer graphics cards. Tencent, on the other hand, is betting on China’s high-growth digital economy.

While both of those stocks need to rise by about 60% to club, it should be noted that Nvidia has risen more than 75% in four of the past five years. Tencent has been less successful.

“Regulation is an uncertainty, but China’s digital economy will continue to grow and Tencent will be part of it,” said Peter Garnery, head of equity strategy at Saxo Bank. He looks at Nvidia, Tencent, PayPal Inc., ASML Holding NV and TSMC. Ltd as potential candidates in the next few years.

Tencent was on the verge of hitting the milestone in January, but it’s since been on a downward trajectory to own WeChat due to Beijing’s crackdown on gaming and digital companies. Facebook Inc. saw a similar fate amid a slowdown in digital advertising and negative news about the platform, with the social media giant losing its place in the club.

ASML, the largest equipment manufacturer for the semiconductor industry, could lead the way for Europe’s entry into the elite group in the next few years. The sector’s drive for clean energy could lead to other candidates as the industry benefits from pushing for ESG investments.

“Cleantech will scale as climate change and a clean world are said to be the political goal and industry will solve some of the biggest problems this world faces,” Garnery said.

Those signs are clear with Tesla’s rise this week.

Morgan Stanley analyst Adam Jonas wrote, “The overlay of significant ESG/climatic factors may also have a contributing effect where Tesla is seen as a ‘key event’ in renewable energy.”

For Ryan Jacobs, tech investor at Jacobs Asset Management, the next trillion-dollar company could be a spin-off from existing giants. While no tech elite has shown such intentions, they said that YouTube separating from Alphabet Inc. and AWS being spun off from Amazon.com Inc. could be a trillion-dollar baby in the future. .

“Ebay beats eBay in size and growth with PayPal and PayPal,” Jacob said over the phone.

Still, it may be some time before the market has another megawatt stock to celebrate. Higher interest rates in the US early next year could likely dampen demand for technology stocks as investors calculate that future earnings will be undervalued amid higher borrowing costs.