A decade ago, companies valued at over $1 trillion were virtually unheard of. But tech giants like Apple, Microsoft, Amazon, and Alphabet paved the way, entering the ultra-exclusive trillion-dollar club thanks to booming demand for smartphones and digital services.
Now, after a rocky 2022, two more tech titans—Meta Platforms and Tesla—stand poised to regain membership in the coming year based on shifting strategies and competitive advantages.
1. Meta Leans Into AI to Drive Engagement and Revenue
When Meta Platforms (META: NASDAQ) kicked off 2023, the outlook was bleak. The Facebook and Instagram parent company saw its valuation crater 76% from 2021 highs as advertisers pulled back spending amid economic uncertainty.
CEO Mark Zuckerberg responded swiftly, slashing over 21,000 jobs to control costs. But more importantly, he has dedicated the company’s resources to developing state-of-the-art artificial intelligence.
The results have stunned Wall Street. Revenue hit an all-time high last quarter, driven by a boom in engagement and ad views.
How AI Drove Meta’s Remarkable Turnaround
The secret lies in Meta’s AI advancements. The company’s algorithms now detect the type of content that keeps users most engaged. As a result, time spent on Facebook has climbed 7% this year, while Instagram usage rose 6%.
More eyeballs naturally translate to more ad impressions and social commerce opportunities. But Meta is also arming advertisers themselves with AI tools to craft more compelling, targeted ads.
The combined impact is evident in Meta’s bottom line. Q3 profit skyrocketed 163% versus 2022 on rising sales and leaner operations. The company earned over $11 billion last quarter alone.
With momentum building, Meta’s current $877 billion valuation leaves it within striking distance of reclaiming trillion-dollar status. Based on 2024 earnings projections, the stock would only need to rise another 35% to align with tech sector valuation multiples.
2. Tesla Leverages Pricing Power to Go on Offense
On the surface, conditions seem less favorable for TSLA (NASDAQ). Revenue growth slowed to just 9% last quarter as average vehicle prices declined nearly 20% from 2022 highs. Profitability metrics also eroded as Tesla battled inflation and rivals with discounts.
But for a company laser-focused on market share growth, the strategy is paying dividends. Tesla continues to guide for 1.8 million vehicle deliveries in 2023. And behind the scenes, the pricing leverage is inflicting damage on less efficient competitors.
How Tesla’s Value Could Eclipse $1 Trillion in 2024
Legacy automakers like Ford and GM face thin or negative margins on their early electric models. As Tesla forces industrywide vehicle prices lower, these companies are hitting breaking points. Ford just cut planned capacity of an EV factory in half, conceding demand is falling short of expectations.
In contrast, even after recent margin compression, Tesla led all major automakers in profitability last quarter. The company has room to sacrifice per-unit profits to boost market share.
As the pricing leader in EVs, if Tesla hits its delivery target amid slowing industry growth, its slice of the pie will continue expanding. Combine that with Tesla’s self-driving software ambitions, and the bull case for $1 trillion+ gains momentum.
The company could realize billions in high-margin subscription revenue down the road while also launching a robotaxi network for fully autonomous driving. For investors with patience, Tesla’s innovation pipeline remains unmatched.
Key Takeaways: Meta and Tesla Poised to Rejoin $1 Trillion Club
After turbulent stretches for both companies, the stage is set for Meta Platforms and Tesla to reestablish their standings among the world’s most valuable enterprises:
- Meta is riding an AI-driven rebound back toward profit records and trillion-dollar territory
- Tesla aims to leverage industry-leading vehicle margins to gain market share with targeted price cuts
- If 2023 momentum sustains, Meta and Tesla stock could deliver further 35%+ upside
- Self-driving advancements provide Tesla multiple avenues to surpass a $1 trillion valuation
For Meta, the mantra of efficiency is already paying dividends less than a year after its stock cratered. Tesla finds itself in a more competitive environment, but still dictates the EV pricing landscape.
If each company’s advantages shake out as planned in 2024, we could see two new members inducted into the mega-cap trillion dollar club before long.