AI Insights
Prediction: This Artificial Intelligence (AI) and “Magnificent Seven” Stock Will Be the Next Company to Surpass a $3 Trillion Market Cap by the End of 2025
Key Points
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The artificial intelligence trend will be a huge growth engine for Amazon’s cloud computing division.
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Efficiency improvements should help expand profit margins for its e-commerce business.
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Anticipation of the company’s earnings growth could help drive the shares higher in 2025’s second half.
Only three stocks so far have ever achieved a market capitalization of $3 trillion: Microsoft, Nvidia, and Apple. Tremendous wealth has been created for some long-term investors in these companies — only two countries (China and the United States) have gross domestic products greater than their combined worth today.
In recent years, artificial intelligence (AI) and other technology tailwinds have driven these stocks to previously inconceivable heights, and it looks like the party is just getting started. So, which stock will be next to reach $3 trillion?
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I think it will be Amazon(NASDAQ: AMZN), and it will happen before the year is done. Here’s why.
The next wave of cloud growth
Amazon was positioned perfectly to take advantage of the AI revolution. Over the last two decades, it has built the leading cloud computing infrastructure company, Amazon Web Services (AWS), which as of its last reported quarter had booked more than $110 billion in trailing-12-month revenue. New AI workloads require immense amounts of computing power, which only some of the large cloud providers have the capacity to provide.
AWS’s revenue growth has accelerated in recent quarters, hitting 17% growth year-over-year in Q1 of this year. With spending on AI just getting started, the unit’s revenue growth could stay in the double-digit percentages for many years. Its profit margins are also expanding, and hit 37.5% over the last 12 months.
Assuming that its double-digit percentage revenue growth continues over the next several years, Amazon Web Services will reach $200 billion in annual revenue within the decade. At its current 37.5% operating margin, that would equate to a cool $75 billion in operating income just from AWS. Investors can anticipate this growth and should start pricing those expected profits into the stock as the second half of 2025 progresses.
Image source: Getty Images.
Automation and margin expansion
For years, Amazon’s e-commerce platform operated at razor-thin margins. Over the past 12 months, the company’s North America division generated close to $400 billion in revenue but produced just $25.8 billion in operating income, or a 6.3% profit margin.
However, in the last few quarters, the fruits of Amazon’s long-term investments have begun to ripen in the form of profit margin expansion. The company spent billions of dollars to build out a vertically integrated delivery network that will give it operating leverage at increasing scale. It now has an advertising division generating tens of billions of dollars in annual revenue. It’s beginning to roll out more advanced robotics systems at its warehouses, so they will require fewer workers to operate. All of this should lead to long-term profit margin expansion.
Indeed, its North American segment’s operating margin has begun to expand already, but it still has plenty of room to grow. With growing contributions to the top line from high-margin revenue sources like subscriptions, advertising, and third-party seller services combined with a highly efficient and automated logistics network, Amazon could easily expand its North American operating margin to 15% within the next few years. On $500 billion in annual revenue, that would equate to $75 billion in annual operating income from the retail-focused segment.
AMZN Operating Income (TTM) data by YCharts.
The path to $3 trillion
Currently, Amazon’s market cap is in the neighborhood of $2.3 trillion. But over the course of the rest of this year, investors should get a clearer picture of its profit margin expansion story and the earnings growth it can expect due to the AI trend and its ever more efficient e-commerce network.
Today, the AWS and North American (retail) segments combine to produce annual operating income of $72 billion. But based on these projections, within a decade, we can expect that figure to hit $150 billion. And that is assuming that the international segment — which still operates at quite narrow margins — provides zero operating income.
It won’t happen this year, but investors habitually price the future of companies into their stocks, and it will become increasingly clear that Amazon still has huge potential to grow its earnings over the next decade.
For a company with $150 billion in annual earnings, a $3 trillion market cap would give it an earnings ratio of 20. That’s an entirely reasonable valuation for a business such as Amazon. It’s not guaranteed to reach that market cap in 2025, but I believe investors will grow increasingly optimistic about Amazon’s future earnings potential as we progress through the second half of this year, driving its share price to new heights and keeping its shareholders fat and happy.
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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. Brett Schafer has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia. The Motley Fool 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.
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How automation is using the latest technology across various sectors
A majority of small businesses are using artificial intelligence and finding out it can save time and money.
Artificial Intelligence and automation are often used interchangeably. While the technologies are similar, the concepts are different. Automation is often used to reduce human labor for routine or predictable tasks, while A.I. simulates human intelligence that can eventually act independently.
“Artificial intelligence is a way of making workers more productive, and whether or not that enhanced productivity leads to more jobs or less jobs really depends on a field-by-field basis,” said senior advisor Gregory Allen with the Wadhwani A.I. center at the Center for Strategic and International Studies. “Past examples of automation, such as agriculture, in the 1920s, roughly one out of every three workers in America worked on a farm. And there was about 100 million Americans then. Fast forward to today, and we have a country of more than 300 million people, but less than 1% of Americans do their work on a farm.”
A similar trend happened throughout the manufacturing sector. At the end of the year 2000, there were more than 17 million manufacturing workers according to the U.S. Bureau of Labor statistics and the Federal Reserve Bank of St. Louis. As of June, there are 12.7 million workers. Research from the University of Chicago found, while automation had little effect on overall employment, robots did impact the manufacturing sector.
“Tractors made farmers vastly more productive, but that didn’t result in more farming jobs. It just resulted in much more productivity in agriculture,” Allen said.
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Researchers are able to analyze the performance of Major League Baseball pitchers by using A.I. algorithms and stadium camera systems. (University of Waterloo / Fox News)
According to our Fox News Polling, just 3% of voters expressed fear over A.I.’s threat to jobs when asked about their first reaction to the technology without a listed set of responses. Overall, 43% gave negative reviews while 26% reacted positively.
Robots now are being trained to work alongside humans. Some have been built to help with household chores, address worker shortages in certain sectors and even participate in robotic sporting events.
The most recent data from the International Federation of Robotics found more than 4 million robots working in factories around the world in 2023. 70% of new robots deployed that year, began work alongside humans in Asia. Many of those now incorporate artificial intelligence to enhance productivity.
“We’re seeing a labor shortage actually in many industries, automotive, transportation and so on, where the older generation is going into retirement. The middle generation is not interested in those tasks anymore and the younger generation for sure wants to do other things,” Arnaud Robert with Hexagon Robotics Division told Reuters.
Hexagon is developing a robot called AEON. The humanoid is built to work in live industrial settings and has an A.I. driven system with special intelligence. Its wheels help it move four times faster than humans typically walk. The bot can also go up steps while mapping its surroundings with 22 sensors.
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Researchers are able to create 3D models of pitchers, which athletes and trainers could study from multiple angles. (University of Waterloo)
“What you see with technology waves is that there is an adjustment that the economy has to make, but ultimately, it makes our economy more dynamic,” White House A.I. and Crypto Czar David Sacks said. “It increases the wealth of our economy and the size of our economy, and it ultimately improves productivity and wages.”
Driverless cars are also using A.I. to safely hit the road. Waymo uses detailed maps and real-time sensor data to determine its location at all times.
“The more they send these vehicles out with a bunch of sensors that are gathering data as they drive every additional mile, they’re creating more data for that training data set,” Allen said.
Even major league sports are using automation, and in some cases artificial intelligence. Researchers at the University of Waterloo in Canada are using A.I. algorithms and stadium camera systems to analyze Major League Baseball pitcher performance. The Baltimore Orioles joint-funded the project called Pitchernet, which could help improve form and prevent injuries. Using Hawk-Eye Innovations camera systems and smartphone video, researchers created 3D models of pitchers that athletes and trainers could study from multiple angles. Unlike most video, the models remove blurriness, giving a clearer view of the pitcher’s movements. Researchers are also exploring using the Pitchernet technology in batting and other sports like hockey and basketball.
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Overview of a PitcherNet System graphics analyzing a pitcher’s baseball throw. (University of Waterloo)
The same technology is also being used as part of testing for an Automated Ball-Strike System, or ABS. Triple-A minor league teams have been using the so-called robot umpires for the past few seasons. Teams tested both situations in which the technology called every pitch and when it was used as challenge system. Major League Baseball also began testing the challenge system in 13 of its spring training parks across Florida and Arizona this February and March.
Each team started a game with two challenges. The batter, pitcher and catcher were the only players who could contest a ball-strike call. Teams lost a challenge if the umpire’s original call was confirmed. The system allowed umpires to keep their jobs, while strike zone calls were slightly more accurate. According to MLB, just 2.6% of calls were challenged throughout spring training games that incorporated ABS. 52.2% of those challenges were overturned. Catchers had the highest success rate at 56%, followed by batters at 50% and pitchers at 41%.
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Triple-A announced last summer it would shift to a full challenge system. MLB commissioner Rob Manfred said in June, MLB could incorporate the automated system into its regular season as soon as 2026. The Athletic reports, major league teams would use the same challenge system from spring training, with human umpires still making the majority of the calls.
Many companies across other sectors agree that machines should not go unsupervised.
“I think that we should always ensure that AI remains under human control,” Microsoft Vice Chair and President Brad Smith said. “One of first proposals we made early in 2023 was to insure that A.I., always has an off switch, that it has an emergency brake. Now that’s the way high-speed trains work. That’s the way the school buses, we put our children on, work. Let’s ensure that AI works this way as well.”
AI Insights
Artificial intelligence predicts which South American cities will disappear by 2100
The effects of global warming and climate change are being felt around the world. Extreme weather events are expected to become more frequent from droughts to floods wreaking havoc on communities as well as blistering heatwaves and bone-chilling cold snaps.
While these will affect localized areas temporarily, one inescapable consequence of the increasing temperatures for costal communities around the globe is rising sea levels. This phenomenon will have even more far-reaching effects, displacing hundreds of millions of people as coastal communities are inundated by water, some permanently.
These South American cities will disappear
While there is no doubt that sea levels will rise, predicting exactly how much they will in any given location is a tricky business. This is because oceans don’t rise uniformly as more water is added to the total volume.
However, according to models from the Intergovernmental Panel on Climate Change (IPCC) the most optimistic scenario is between 11 inches and almost 22 inches, if we can curb carbon emissions and keep the temperature rise to 1.5C by 2050. The worst case scenario would be 6 and a half feet by the end of the century.
Caracol Radio in Colombia asked various artificial intelligence systems which cities in South America would disappear due to rising sea levels within the next 200 years. These are the ones most at risk according to their findings:
- Santos, Brazil
- Macaió, Brazil
- Floreanópolis, Brazil
- Mar de Plata, Argentina
- Barranquilla, Colombia
- Lima, Peru
- Cartagena, Colombia
- Paramaribo, Surinam
- Georgetown, Guayana
The last two will be underwater by the end of the century according to modeling done by the non-profit Climate Central along with numerous other communities in low-lying coastal areas.
Their simulator only makes forecasts until the year 2100 as the above image shows for the areas along the northeastern coast of South America including Paramaribo and Georgetown.
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