Two decades ago, the stock market was dominated by industrial giants like General Electric and ExxonMobil, with market caps of $319 billion and $283 billion, respectively. Fast forward to today, and the technology sector reigns supreme.

At the helm are tech titans such as Apple, valued at an impressive $3.5 trillion at the moment. Nvidia and Microsoft closely follow, boasting market caps of $3.2 trillion and $3.1 trillion, respectively.

With a market cap of $2 trillion, Alphabet (NASDAQ: GOOGL) has been steadily making its way up the ranks. Despite the initial skepticism, the stock has surged by 88% in the past year and an impressive 172% over the last five years.

The company’s promising trajectory can be attributed to various factors, including a recovering economy, Alphabet’s market position, and advancements in artificial intelligence (AI).

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In the face of challenging times marked by economic headwinds and high inflation rates reminiscent of the 1980s, Alphabet weathered the storm. Recent months have seen a notable upturn, with significant strides in performance.

The economic recovery has had a remarkable impact on Alphabet’s financials. In the second quarter, revenue surged to $84.7 billion, up 14% year over year, while diluted earnings per share (EPS) soared by 31% to $1.89.

Advertising, a key revenue driver, experienced a resurgence, particularly in Google advertising, which saw an 11% increase year over year, alongside a 29% growth in Google Cloud, the company’s fastest-growing segment.

Google has cemented its status as a leader in search, commanding a whopping 90% share of the search market. The company’s ongoing efforts to enhance its search capabilities and algorithms have positioned it as an authority in AI.

Additionally, Google dominates the digital advertising space, securing 39% of global digital ad revenue in 2023, where its closest competitor trails far behind at 18%. Its cloud computing arm, Google Cloud, stands out as a major player, ranking as one of the top three providers and boasting a 30% revenue growth in the previous year.

Alphabet’s foray into generative AI services with offerings like Gemini further bolsters the appeal of Google Cloud, attracting a growing user base.

Amid Alphabet’s stellar performance lies the uncertainty stemming from an ongoing antitrust case. While concerns loom regarding potential interventions, including the breakup of the company, the impact remains speculative.

While Wall Street grapples with the uncertainty, the potential outcomes, including value unlocking if a breakup were to occur, are viewed by some as noise amidst Alphabet’s broader narrative.

Alphabet’s current $2 trillion market cap signifies a necessary 47% stock price appreciation to reach $3 trillion. Forecasts predict a revenue of $347.4 billion for 2024, translating to a forward price-to-sales (P/S) ratio of roughly 6.

If Alphabet realizes an 11% annual revenue growth over the next five years, it could see its market cap hitting $3 trillion by 2028. Notably, Alphabet has historically outperformed revenue projections, hinting at the potential for an earlier milestone.

With Alphabet trading at a discounted earnings multiple compared to the S&P 500, the company’s growth prospects remain compelling amidst ongoing market fluctuations.