The $1 Trillion Question: Will LLY, TSMC or TSLA Be Wall Street’s Next Nvidia?
The extraordinary rise of Nvidia (NASDAQ:NVDA) was driven by the emergence of generative AI. This technology hinges on the use of powerful computer chips in which the stock is a market leader.
Last year, the S&P 500 climbed an impressive 24%. However, the outlook for 2024 is a little calmer. Goldman Sachs forecasts a rise to 4700 by year’s end, a price gain of 5%.
This makes the challenge of surpassing the one trillion dollar market capitalization mark more difficult for innovative stocks. However, these three contenders shine as key candidates to become new additions to the trillion dollar club.
Eli Lilly (LLY)
Eli Lilly’s (NYSE:LLY) growth prompted Morgan Stanley analyst Terence Flynn to question the stock’s potential to reach $1 trillion.
“Could LLY be the first $1 trillion biopharma stock?” Flynn asked in a February research note. “We continue to see a path for further upside.”
True, it’s unusual for pharmaceutical companies to rally beyond a $1 trillion market capitalization. Yet, Eli Lilly’s prospects have received a boost from sales of its new obesity medicine Zepbound, which became available in December.
The medicine soared beyond analyst estimates of $75 million by recording $175.8 million in sales. Additionally, revenue for diabetes drug Mounjaro reached $2.2 billion, beating analysts’ consensus of $1.73 billion.
These positive figures are supported by Lilly’s strong net income growth. The pharma giants reported Q4 of 2023 net income of $2.19 billion. This represents a 13% rise year over year (YOY), which weighed in at $1.94 billion.
Taiwan Semiconductor Manufacturing Company (TSM)
Although Taiwan Semiconductor Manufacturing Company (NYSE:TSM) experienced dips in both revenue and net income in Q4 2023 YOY, the company still beat expectations in a way that underlines TSMC’s bold future ambitions.
With Apple and Nvidia among TSMC’s largest clients, the firm is positioned to directly benefit from the latter’s strong Wall Street position over the long term. This is true in spite of macroeconomic conditions and an inventory adjustment cycle hampering its bottom line over the past year.
Despite falling revenue and net income in comparison to 2022, TSM’s Wall Street performance saw growth of more than 20% throughout 2023. Further, the firm ended Q4 on a strong note.
“In the fourth quarter, revenue increased 14.4% sequentially [from Q3 2023], supported by the continued strong ramp of our industry-leading 3-nanometer technology,” claimed TSMC in the earnings report.
Also, expected mass production is more than one trillion transistors by 2030. So, it appears TSMC is well-positioned to continue serving Nvidia’s rapid growth in a way that will secure its own prosperity.
Fundamentally, the continued emergence of generative AI can play a key role in TSMC’s path to a market cap in excess of $1 trillion. And, with no signs of the industry slowing down, TSMC may reap the benefits.
Tesla (TSLA)
Nobody doubts that Tesla (NASDAQ:TSLA) hasn’t had a difficult time in recent years. The company struggled to recapture its former peak market capitalization of over $1.2 trillion in 2021.
However, this doesn’t suggest that Tesla’s time as a Wall Street star is over. In fact, the electric vehicle (EV) giant has posted encouraging Q4 2024 results. Specifically, earnings of $2.27 per share represent a 3% top-line increase to $25.17 billion.
Additionally, Counterpoint Research has projected Tesla sales to grow by between 20% and 25% YOY in 2024. Also, delivery is anticipated for nearly 2.2 to 2.3 million vehicles.
Under the leadership of CEO Elon Musk, there’s rarely a dull moment for Tesla shareholders. But Wedbush analyst Dan Ives believes that Musk has managed to pull a masterstroke for his vehicle sales in 2023. And so, the benefits are set to take hold over the coming months.
“Musk made a poker move for the ages and cut prices globally with China front and center to catalyze volumes/units which should now impressively be in the 1.8 million range for 2023,” Ives suggested in a note to clients in late 2023.
Furthermore, the TSLA price target of $350 is set by Ives for the end of 2024. Therefore, Tesla would reach the $1.11 trillion capitalization mark and recapture its status as a trillion dollar stock once again. If the projected vehicle sales can be achieved, there’s no reason why Tesla wouldn’t expand the Magnificent Seven into a group of eight.
On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
