The Best Trillion-Dollar Stock to Buy Now, According to Wall Street (Hint: Not Nvidia)

Only 10 companies listed on U.S. stock exchanges currently have market values above $1 trillion. They are listed below in descending order based on upside (or downside) implied by the median target price set by Wall Street analysts as of Sept. 2:

1. Microsoft (MSFT -0.28%) has a median target of $630 per share, implying 26% upside from the current share price of $501.
2. Nvidia has a median target of $211 per share, implying 24% upside from its current share price of $170.
3. Taiwan Semiconductor has a median target of $276 per share, implying 21% upside from its current share price of $228.
4. Meta Platforms has a median target of $875 per share, implying 20% upside from the current share price of $731.
5. Amazon has a median target of $264 per share, implying 18% upside from the current share price of $224.
6. Alphabet has a median target of $225 per share, implying 8% upside from the current share price of $208.
7. Apple has a median target of $245 per share, implying 7% upside from the current share price of $228.
8. Broadcom has a median target of $310 per share, implying 5% upside from the current share price of $295.
9. Berkshire Hathaway has a median target of $487 per share, implying 1% downside from the current share price of $501.
10. Tesla has a median target of $329 per share, implying 1% downside from the current share price of $331.

Most Wall Street analysts see Microsoft as the best trillion-dollar stock to buy now, though Nvidia is a close second. Here’s what investors should know.

Microsoft is profiting from artificial intelligence across its software and cloud businesses

Microsoft is the largest enterprise software vendor in the world. The company is leaning into that strength with generative artificial intelligence (AI). Microsoft 365 Copilot is an AI assistant that can summarize text and recommend actions in office applications like Word and Excel. Microsoft has also added copilots to its enterprise resource planning, business intelligence, and cybersecurity software.

Importantly, the number of customers using Microsoft 365 Copilot tripled during the March quarter, and that momentum carried into the June quarter. “Customers continue to adopt Copilot at a faster rate than any other new Microsoft 365 suite,” CEO Satya Nadella told analysts on the latest earnings call. Monthly active users across the entire copilot family surpassed 100 million in the June quarter.

Additionally, Microsoft Azure is the second-largest public cloud as measured by infrastructure and platform services revenue. Morgan Stanley frequently surveys CIOs for insights about future IT spending, and Microsoft Azure has consistently ranked as the cloud provider most likely to gain share in the next three years. However, its market share actually dropped 3 percentage points in the past year, as Alphabet, CoreWeave, and Oracle gained share.

Nevertheless, Satya Nadella says that Microsoft continued to take market share in AI infrastructure services in the June quarter as it scaled data center capacity faster than any other competitor. “I have never been more confident in Microsoft’s opportunity to drive long-term growth and define what the future looks like,” he told analysts on the recent earnings call.

Microsoft looked strong in the June quarter, but the stock is expensive

Microsoft reported solid financial results in the June quarter that beat expectations on the top and bottom lines. Revenue increased 18% to $76.4 billion on strong momentum across cloud, software, and advertising. Generally accepted accounting principles (GAAP) net income rose 24% to $3.65 per diluted share.

Going forward, Microsoft is well positioned to grow its business as it leans into AI across its software and cloud businesses. Grand View Research estimates enterprise software spending will increase at 12% annually through 2030, while cloud services spending is projected to grow at 20% annually during the same period.

In turn, Wall Street expects Microsoft’s earnings to increase at 12% annually over the next three years, a rather conservative estimate that makes the current valuation of 37 times earnings look expensive. Those figures give a price-to-earnings-to-growth (PEG) ratio above 3, which is a material premium to several other cloud infrastructure companies. For instance, Alphabet, Amazon, and Nvidia have PEG ratios below 2.

Here’s the bottom line: Microsoft has strong positions in the enterprise software and cloud services markets, and the company is executing on an AI-centric growth strategy in both business segments. Nevertheless, the current valuation of 37 times earnings — a premium to the three-year average of 33 times earnings — is concerning. I think patient investors can buy a few shares today, but I would keep the purchase very small.