It seems strange to think that United States Steel was once one of the world’s great growth stocks. But it must have been as it rode a global steel boom to become the first ever $1bn company in 1901.
Similarly, General Motors capitalised on the automobile revolution to become the world’s only $10bn firm in 1955. Exactly 40 years later, General Electric made history as the first market cap to top $100bn.
Then the widespread adoption of smartphones propelled Apple to a record $1trn valuation in 2018. It is now worth $3trn, along with Microsoft.
Today, there are thousands of United States Steels ($1bn firms) and hundreds of stocks above $10bn. And there are 87 listed US companies with a market cap above $100bn. Even the sleepy FTSE 100 has six!
So, history shows it’s a question of when not if the next batch of £1trn stocks emerge. Here are three that could get there in 10 years or earlier.
ASML
Today’s technological revolution looks set to speed up with the rapid progress of artificial intelligence (AI) and other advanced technologies.
The common denominator in all this is the semiconductor. And the only company that sells the machines needed for cutting-edge chip manufacturing is ASML (NASDAQ: ASML).
The Dutch firm’s extreme ultraviolet (EUV) lithography system took three decades of research and billions of dollars to perfect. It contains hundreds of thousands of components — some of them pushing the boundaries of physics — from a bewilderingly complex supply chain.
Good luck trying to replicate that!
This monopolistic position at the centre of the industry means it should continue to grow as its largest customers — Intel, Samsung, and TSMC — build new chip foundries and upgrade existing ones.
For 2023, the company reported net sales of €27.6bn, a gross margin of 51%, and net income of €7.8bn. It now has an order backlog of €39bn.
Now, one risk worth highlighting is the ongoing US-China geopolitical tensions. ASML is prevented from selling many of its products to Chinese customers. This will likely slow its growth trajectory.
Still, due to its critical importance today, I’m backing it to become a trillion-dollar company, possibly Europe’s first.
With a market cap of $345bn, its share price would need to rise around 189%. That’s achievable, in my opinion.
Mastercard and Visa
My next two candidates, Visa (NYSE: V) and Mastercard (NYSE: MA), also possess enviable competitive positions. Outside of China, they dominate the digital payment processing market.
This immediately raises some risk, as the two firms are facing regulatory scrutiny. However, this hasn’t yet affected their competitive or financial positions. Visa processes more than 270bn electronic transactions every year. Mastercard isn’t far behind.
To be honest, this doesn’t surprise me. Everywhere around us, consumers are tapping their phones and credit cards. Along with millions of others, I rarely even carry cash these days.
Then there’s global e-commerce, which still has decades of global adoption and growth to go.
Both firms take a small slice of every transaction flowing through their networks. This means even inflation can provide a tailwind, assuming consumer spending doesn’t fall.
With respective market caps of $537bn and $407bn, Visa and Mastercard look poised to join the exclusive $1trn valuation club over the next decade.
