Prediction: This unstoppable hypergrowth company will be the first $10 trillion stock (hint: it's not Nvidia)

Over the past decade, the markets have reached some important numerical milestones from a market capitalization perspective. Apple was the first company to reach a trillion dollar market capitalization in 2018. The other “Magnificent 7” stocks – which Bank of America’s chief investment strategist Michael Hartnett referred to as Apple, alphabet, Amazon (NASDAQ:AMZN), Meta-platforms, Microsoft, NVIDIAAnd Teslas — followed soon. Now Apple, Microsoft and Nvidia are all valued at over 3 trillion US dollars. That's a lot of money.

The next big milestone will be a $10 trillion market cap. The race between the tech giants can start today. Even though Amazon is well behind some of the other Magnificent 7 stocks, I expect it to be the first company to reach a $10 trillion market cap. Here's why.

E-commerce still has a lot of room to grow

Amazon and its sprawling e-commerce empire are well known. Looking at the North American segment – which also includes areas such as hardware and advertising – sales reached $370 billion in the last 12 months to June of this year. Despite being around for so long and having many critics in the media and government, Amazon is expected to reach a market share of over 40% of US e-commerce sales this year.

If Amazon can maintain its market share in this category, there is plenty of room for sales growth in North America over the next five to ten years. E-commerce accounts for just 16% of retail sales in the U.S. today. If that share eventually doubles to 32%, Amazon's annual North American sales will reach $740 billion.

Given the high fixed costs across the e-commerce supply chain, higher sales will lead to an increase in profit margins. The company will also benefit from fast-growing advertising services and third-party sales, which are making up an ever-larger share of Amazon's retail pie. Over the last 12 months, Amazon's operating margin in North America was 5.6% and continues to rise. I think this segment can reach an operating margin of over 15% over the next 10 years.

An operating margin of 15% on sales of $740 billion equates to operating profits of $111 billion in the North American retail segment alone. Remember that number.

Cloud Computing and AI

On the other hand, Amazon has a perhaps even more promising division in Amazon Web Services (AWS). The market leader in cloud computing is close to crossing the $100 billion mark in annual revenue and boasts impressive profit margins of over 30%. The company is currently riding a wave of growth in the field of artificial intelligence (AI), but aspires to form the basis for all kinds of modern software and other applications.

Like e-commerce, the world is still in the early stages of moving to cloud computing. On the last earnings call, executives reiterated that the “vast majority” of IT spending is still done on-premises. They believe that this share will eventually move to cloud computing solutions, which will benefit AWS.

AWS's revenue is currently growing at nearly 20% annually. If that growth slows to an average of 15% per year over the next 10 years, the division will eventually generate $400 billion in annual revenue. That's not a far-fetched assumption, considering that global IT spending is in the trillions and the sector is growing year after year.

Assuming operating margins remain at 30% or more, $400 billion in revenue equates to $120 billion in AWS operating income over 10 years.

AMZN market cap data by YCharts.

The road to $10 trillion (and don't forget international growth)

In short, I think Amazon is the company most likely to reach a $10 trillion market cap because of its huge growth potential in e-commerce and cloud computing. This is an unprecedented tailwind that even surpasses other stocks in the Magnificent 7 that appear to be closer to market saturation.

Now for the calculation that leads to a $10 trillion valuation. Adding $120 billion in revenue from AWS and $111 billion in revenue from North America, Amazon will make a total of $231 billion in profit in 10 years. But let's not forget the third pillar of Amazon's business: international retail. The segment generates $136 billion in revenue, but has negligible profits due to its presence in emerging markets like India.

While markets like India may be a headwind to earnings today, they can be a huge growth engine if India's GDP per capita continues to grow at an impressive rate. A lot still needs to go right in these other countries, but it's possible that the international segment could be generating hundreds of billions in revenue and tens of billions in operating profits in 10 years if it can achieve profit margins similar to those in North America.

All in all, I believe Amazon can generate $300 billion in profits in 10 years. At a price-to-earnings (P/E) ratio of 33—not uncommon for large technology stocks—$300 billion in profits equates to a market cap of $10 trillion.

I know that's a lot of math, but that's how Amazon hits the next market cap milestone and wins the race to become the largest company in the world. Regardless of how quickly it gets there, the stock looks like a buy-and-hold investment today at a market cap of $1.86 trillion.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brett Schafer has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. 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.

Prediction: This Unstoppable Hypergrowth Company Will Be the First $10 Trillion Stock (Hint: It's Not Nvidia) was originally published by The Motley Fool