Among the stocks traded on U.S. stock exchanges, four currently boast market capitalizations exceeding $1 trillion, all of which have made significant strides in artificial intelligence (AI) development. However, a new contender is emerging on the horizon. Nvidia came tantalizingly close to the $1 trillion mark in recent weeks and presently stands at nearly $980 billion.

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Nvidia's ascent to the twelve-figure milestone is within reach, and another AI frontrunner could soon follow suit. Let us explore the AI stock most likely to join the esteemed $1 trillion club alongside Nvidia.

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Reclaiming Its Membership: Meta Platforms

Meta Platforms (formerly known as Facebook) achieved a market capitalization surpassing $1 trillion in 2021, although it was short-lived. By the end of 2022, the company suffered a substantial decline, losing nearly 75% of its peak value. Investors grew disenchanted with Meta's focus on the metaverse and its declining profitability, causing some to relegate the company to the annals of tech history.

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Nevertheless, astute observers began recognizing the attractive valuation of Meta. They rightly emphasized that the company's social media platforms continued to engage nearly three billion individuals worldwide on a daily basis. Meta further piqued investor interest by surpassing earnings estimates in the first quarter of 2023, a welcome deviation from the recent trend. These developments breathed new life into the faltering stock.

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The recent AI fervor sparked by OpenAI's ChatGPT launch also contributed to Meta's resurgence. In 2023 alone, Meta's share price has soared by almost 150%, driving its market capitalization to approximately $680 billion.

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Meta's Path to $1 Trillion

How can Meta reclaim a market capitalization of at least $1 trillion? The answer lies in increasing its earnings. However, the more complex challenge is convincing investors that its future earnings potential surpasses previous expectations.

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Significantly, I believe Meta possesses the ability to substantially grow its earnings. The digital advertising market is poised for a rebound, and the full impact of Meta's restructuring and layoffs is yet to be fully realized. Meta's AI initiatives are effectively enhancing monetization on platforms like Facebook and Instagram Reels.

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Moreover, AI might prove instrumental in persuading investors about Meta's long-term growth prospects. The company is actively incorporating generative AI chat into Messenger and WhatsApp while developing AI tools to facilitate video creation for advertisements and posts on Facebook and Instagram. Additionally, Meta aims to deploy AI agents to aid businesses in customer support.

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These AI endeavors not only contribute to Meta's metaverse vision but also enhance its potential for long-term growth. CEO Mark Zuckerberg remains steadfast in his commitment to the metaverse, envisioning AI as a tool to assist in avatar and virtual world creation.

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Potential Obstacles

Despite these promising developments, Meta might not be the next AI stock to join the coveted $1 trillion club. Two notable obstacles warrant consideration.

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Firstly, Tesla, viewed by some, including Ark Invest CEO Cathie Wood, as a leading AI stock, could reach the milestone ahead of Meta. With a market capitalization of approximately $780 billion, Tesla's proximity to the $1 trillion threshold poses a formidable challenge. Nevertheless, Wall Street appears more inclined towards Meta, potentially influenced by valuation. Meta boasts a price-to-earnings-to-growth (PEG) ratio of 0.91, significantly lower than Tesla's PEG multiple of nearly 2.5.

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Secondly, Meta could face competition from the current $1 trillion club leader, Apple. If investors favor Apple's Vision Pro mixed-reality headset as the future of technology, they may lose interest in Meta's augmented reality (AR) and virtual reality (VR) aspirations. While Zuckerberg reportedly expressed less enthusiasm for Vision Pro, stating it is not his preferred vision of computing, it remains uncertain whether his preference aligns with market trends.

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However, Apple's substantial price tag for its mixed-reality headset might limit widespread adoption. Furthermore, competition in the AR and VR space could ultimately benefit Meta by amplifying consumer interest in these technologies.

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