Currently, Apple (NASDAQ: AAPL) is atop the throne as the largest company in the world. It leads second-place Nvidia (NASDAQ: NVDA) by $280 billion, but I don’t think it will maintain its leadership position.
In the next five years, I think multiple companies will overtake Apple, but two picks are Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN). These two have a strong case for becoming larger than Apple, but it won’t happen overnight.
Why am I bearish on Apple?
First off, let’s talk about Apple. In my opinion, Apple is trading so high due to its past performance. If you look at the performance without the name attached, Apple isn’t currently that great of an investment. If I approached you with a stock that posted shrinking revenue for five of the last seven quarters, and in the two quarters it delivered growth, the best growth rate was 5%, you’d probably pass. Throw in the fact that this company is trading at 34 times forward earnings, and you’d run for the hills.
But, because Apple is Apple, investors give it a pass. This won’t go on forever, and eventually, something will give. This opens up a lane for Alphabet and Amazon to surpass it, as they still have multiple growth catalysts ahead of them.
Cloud computing is a huge part of Amazon’s and Alphabet’s investment thesis
While many think of Amazon as just an e-commerce channel, it’s much more than that. Commerce businesses have notoriously low margins, so Amazon has multiple other divisions that help boost its profits. One of the fastest growing is its advertising services, which has been on fire over the past few years.
Another strong segment is Amazon Web Services (AWS), its cloud computing offering. AWS is the largest cloud computing business by market share but has recently delivered slightly less growth than its competition. However, AWS’ growth has reaccelerated, which is a huge selling point for the stock.
Although AWS makes up 18% of Amazon’s revenue, it accounted for 64% of its operating profit in the second quarter. Though Amazon’s business is much broader than cloud computing, its cloud…
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