If any trend has become glaringly apparent in the last four years, it’s that investors bet on the perceived winning horse. And that perception largely stems from the market cap concentration at the top. In 2020, the top 10 S&P 500 (SPX) companies had 58.9% weight.
In 2024, this percentage rose to 77.2%, similar to the pre-Great Recession level during 2007. Year-to-date, these chosen companies propelled SPX to 17.38% gains. Alongside The Nasdaq Composite (IXIC), SPX reached a new all-time high last Friday.
Although this could signal bad timing to enter the market, history has shown that new highs tend to accelerate gains. When JPMorgan (NYSE:JPM) analyzed stock market data between 1988 and 2020, it revealed 50.4% three-year returns when buying stocks in all-time high periods.
But which stocks are the most likely to hit their $1 trillion milestones?
Taiwan Semiconductor Manufacturing Corporation
Even with China-US tensions on the table, it isn’t easy to find a stock with a wider moat than Taiwan Semiconductor Manufacturing (NYSE:TSM). Of the major semiconductor players, such as AMD (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), and Intel (NASDAQ:INTC), only the latter has its chip foundries. Yet, while Intel aims to become the second largest chip foundry, sandwiched between TSMC and Samsung (KS:005930) by 2030, the company is looking at a rough road ahead.
In contrast, not only is TSMC the world’s top chip manufacturer, but it also has the full backing of the USG as a matter of foreign policy. In Q1 2024, TSMC exceeded revenue and profit expectations, riding on the generative AI demand. While the company’s revenue rose 16.5% year-over-year, its net income increased 8.9%.
For Q2 earnings, scheduled for July 18th, TSMC’s growth is likely to continue based on “insatiable AI-related demand for energy-efficient computing power,” per TSMC CEO C. C. Wei. Barring geopolitical black swans, the company is the first to sustainably cross the $1 trillion market cap in a matter of weeks from the present $983.07 billion.
At its current price level of $189.13 per share, TSM stock is nearly double its 52-week average of $117.71. Having already exceeded Nasdaq’s average price target of $182.56, TSM shares appear to be heading for the $218 ceiling instead.
Berkshire Hathaway
At a time when US corporate bankruptcies hit the highest level in June since 2020, investors should consider Warren Buffett’s portfolio of exposures. Across tech (49.9%), finance (20.9%), consumer staples (11.8%) and energy sector (10.1%), Berkshire Hathaway (NYSE:BRKb) (NYSE:BRKa) offers plenty of diversification while also swimming in cash (record $189 billion by the end of Q1’ 24).
These sectors are poised to fortify their bottom lines from expected Fed rate cuts. According to recent Citi Research data, the central bank will likely cut 200 points over the next eight FOMC meetings.
Moreover, Berkshire has a robust stock buyback program, having returned $9.2 billion to shareholders during 2023. In March, the investment holding company accelerated the repurchase pace to further boost investor confidence. Berkshire
At the present price of $411.80, BRK.B stock is well above the 52-week average of $378 per share. WSJ’s average price forecast places BRK.B shares at $460.11, with even the less optimistic $430.22 being above the current price level. Berkshire’s current market cap is $875.97 billion.
Tesla
After being delegated to negative YTD performance territory throughout the year, Tesla Inc's (NASDAQ:TSLA) turning point started with exceeded Q2 deliveries last week. Investors are now speculating that another turning point could happen on August 8th, centered around robotaxis.
The leading EV manufacturer had already proven it could be a $1 trillion company, having crossed that threshold in October 2021. Currently, TSLA stock is still under the 52-week high of $299.29, at $256.11 per share.
Wedbush analyst Daniel Ives raised TSLA’s price target from $275 to $300, while Ark Invest’s price target dropped to $2,600 by 2029, provided Elon Musk’s Full Self-Driving (FSD) vision materializes.
On July 23rd, the company is scheduled to report its Q2 earnings, forecasted at $0.47 EPS. Tesla’s current market cap is $785.79 billion.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.