Prediction: Artificial Intelligence (AI) will make these two the next trillion-dollar companies

Although it has been just over six years since Apple was the first publicly traded company to break the trillion-dollar mark in market capitalization, but such companies remain few and far between. As of now, only six companies have a market capitalization in the 13-digit range (although Apple is still the largest at nearly $3.5 trillion).

On the other hand, it has been a while since the world was able to see a lot more names move up to the next bigger league.

Now, such an opportunity is emerging in the form of the still-maturing artificial intelligence (AI) market. Some are even calling AI the opportunity of a lifetime. And it could be. Precedence Research predicts that the global AI industry will grow at a compound annual rate of 19% through 2034.

With that in mind, here's an overview of the next two tickers that are riding the AI ​​wave and could reach a market capitalization of one trillion dollars – if that matters.

1. Taiwanese semiconductor manufacturing

Semiconductor manufacturing in Taiwan (TSM -0.79%) is not a household name. But it is unlikely that there is not at least one consumer electronics device in your household that the company was not involved in producing.

Taiwan Semiconductor is considered a contract manufacturer. This means that the company produces many of the microchips that other brands put their labels on. The company's largest customers include NVIDIA, QualcommAnd Appleto name a few. Its customers provide the manufacturer with the designs and specifications of their chips, and the manufacturer in turn supplies the customers with processors and other technological components. This outsourcing arrangement ultimately tends to be cheaper for brands than building and maintaining their own manufacturing facilities. Due to the cost-effectiveness of this model and the company's sheer production capacity, Taiwan Semiconductor is estimated to manufacture around two-thirds of the world's semiconductors and chips. The underlying dynamic behind this reach is also unlikely to change in the foreseeable future.

But that does not mean that his customers are not attempt to break free from their dependence on a single company. Competitors are also looking for ways to increase their share.

However, many of these efforts still ultimately rely on Taiwan Semiconductor. Intel While Apple is investing tens of billions in its own fledgling chip manufacturing business, it still contracts out to its Taiwanese rival to produce the semiconductors it cannot yet manufacture itself. To avoid another supply chain problem like the one caused by the COVID-19 pandemic, Apple is initiating construction of a chip manufacturing facility in Arizona. However, a closer look at the details of these plans reveals that these facilities are actually owned by Taiwan Semiconductor and are being built to better serve Apple directly as a customer.

Be that as it may, the upcoming launch of next-generation AI solutions will require more and better silicon chips. Precedence Research notes that while the overall AI market is growing rapidly, the AI ​​chip market will grow at an average annual rate of 30% through 2032.

Considering that Taiwan Semiconductor expects to be able to successfully mass-produce 2 nm (nanometer) chips by next year—which would make these processors up to 15 percent faster while consuming up to 30 percent less power than today's cutting-edge alternatives—the company is still the main beneficiary of this impending market growth.

The company's market cap currently stands at $887 billion, so it's only a short way to the trillion dollar mark. It wouldn't be crazy to think about when Taiwan Semiconductor could reach a $2 trillion market cap.

2. Broadcom

And the other name with a market capitalization in the 13-digit range? That is Broadcom (AVGO -1.99%)which, according to recent findings, is a $772 billion company.

You probably know Broadcom as a telecommunications and wireless company that rose to prominence at a time when computers and mobile phones were just becoming commonplace. Or you might know it better as Avago. The two companies merged in early 2016, bringing together both companies' already extensive product lines.

What you are allowed to do not What we do know is that one of the biggest bottlenecks facing AI data centers right now is not the speed of the processors crunching the numbers, but the connections between all of those processors into a single, integrated platform.

Broadcom comes to the rescue.

The company continues to work on cutting-edge connectivity solutions, and in May it introduced its fifth-generation PCIe Ethernet adapters, which make it easy and more cost-effective to connect existing motherboards (and thus their processors) to all the others within a data center network. And earlier this year, Broadcom introduced the world's first vertical cavity surface-emitting laser (VCSEL), capable of transmitting digital data at an incredible speed of 200 gigabits per second per lane.

Data centers have been waiting for such a high-speed solution, although the resulting technological leap is so big that they also need time to prepare the infrastructure for it. The company expects to begin commercially shipping this fiber optic technology later this year, helping the AI ​​industry launch the kind of platforms that were envisioned but simply can't be achieved with current technologies.

Meanwhile, Broadcom will continue to manufacture and market more familiar products such as home Wi-Fi chips, car connectivity platforms, cybersecurity tools, traditional microchips, and the like. Given this business and the growing need for next-generation AI data center hardware, analysts expect this company's revenue to nearly double by 2028. Profits will likely grow even more.

Actually, it shouldn’t matter, but it does help

A company's market capitalization is simply a function of its stock price and the number of shares outstanding. It is not a measure of profitability or value. Reaching a trillion-dollar valuation does not provide a cash bonus to the company or its shareholders.

In other words, it's just a number.

From a qualitative point of view, however, it is a status-related award that can increase the value of a stock. A market capitalization of one trillion dollars will not only attract more investor attention to the company in question, but will ultimately put Broadcom and Taiwan Semiconductor shoulder to shoulder with names like Apple and NVIDIAThat's not a bad thing.