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Motley Fool Issues Rare “All In” Buy Alert

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Investing is a long-term game, and history offers plenty of evidence to support that. In a year like 2022, where major indexes like the S&P 500 and the Nasdaq 100 are trading in a bear market, it's a good time for investors to calibrate their focus on a wider target. Looking to the end of the current decade might be a remedy for managing these short-term market jitters. 

Generally speaking, a longer time horizon offers the potential for greater returns. Social media giant Meta Platforms (META -7.59% )  and semiconductor powerhouse Nvidia (NVDA -4.05% ) each have the potential to amass a $1 trillion market valuation by 2030. That means shares in each company would have to more than double in price between now and then.

Meta and Nvidia are each facing unique business challenges that have been magnified by the broader tech sell-off, pushing their respective stocks down by over 56% since late 2021. But here's why they stand to reward long-term investors.

Meta is no stranger to the trillion-dollar club -- in fact, it was a member for a very brief period of time when its stock traded near its all-time high price of $384 in September last year. It has since declined by 58% and sits at a more modest valuation of $442 billion, but the company is a relentless innovator, and its future opportunities suggest it could rocket back to $1 trillion (and beyond) over the long run. 

After leading the social media industry for over a decade, Meta is pivoting to what it thinks is the next generation of social and professional networking: the metaverse. It's a collection of virtual worlds that can be accessed using an immersive wearable headset. The metaverse generally has significant financial potential, especially on the social networking side of the equation. Meta thinks it could initially attract a billion users to its virtual world, where they could spend hundreds of dollars each on digital goods and services. 

In the big picture, some estimates suggest the metaverse industry could be worth anywhere between $1.6 trillion and $30 trillion by 2030. Meta has the most firepower of any company developing it, having willingly burned $10 billion on its Reality Labs segment in 2021 and a further $2.9 billion in the first quarter of 2022. 

But interestingly, there's an argument for Meta's stock more than doubling from here even without the metaverse, though it has to overcome some short-term challenges first. These include its long-standing Chief Operating Officer Sheryl Sandberg stepping down and changes to Apple's (NASDAQ: AAPL) privacy rules, which are hurting Meta's ability to sell targeted ads. 

The company has generated $13.22 in earnings per share over the last four quarters, so its stock trades at a multiple of 12.3. That's a 51% discount to the Nasdaq 100 index, which trades at a multiple of 25.2. Meta stock would therefore need to rise 104% to $334 to trade in line with the broader market right now, which would give it a $905 billion market valuation. Since the company is still growing, $1 trillion seems well within reach by 2030. 

The semiconductor industry has become one of the most important in the world, as an increasing number of consumer goods are fitted with advanced digital technology. But Nvidia isn't settling for being a world-leading producer of chips; instead, it's building toward a longer-term vision through the platform computing side of its business. 

It's developing powerful software to complement its hardware, leveraging tools like artificial intelligence (AI) and 3D rendering to deliver solutions like self-driving vehicle technology to the world's largest car manufacturers. That specifically is a tiny piece of Nvidia's business right now, but the opportunity could be worth trillions of dollars by 2030. 

The gaming and data center segments are the drivers behind Nvidia's revenue at the moment, making up 88% of its $8.2 billion of total sales in Q1 of fiscal 2023 (ended May 1). The data center is a particularly interesting opportunity as it's no longer a place to simply store information. Nvidia can help customers extract valuable insights from the constant flow of data and can also use it to help train AI models at a scale never before possible. 

Like Meta, Nvidia also has an opportunity in the metaverse. Its Omniverse platform allows developers to build virtual 3D environments for any purpose, whether it's for social media, gaming, or even to build digital twins of real-life assets for industrial applications. So far, 100,000 developers are using the platform, and they include the likes of e-commerce giant Amazon (NASDAQ: AMZN) . 

Nvidia stock has declined 56% from its all-time high, which means it once traded at a market valuation of more than $850 billion. Given it has a hand in not one but several multitrillion-dollar opportunities, it's not unreasonable to expect it could regain its former high -- and even exceed it -- by 2030. Analysts predict the company will generate $33.5 billion in revenue during fiscal 2023, and if it meets that estimate, it will have grown the metric at a compound annual rate of 28% over the last five years. 

If it maintains that growth rate through 2030, it'll be enough for Nvidia to far exceed the $1 trillion valuation mark assuming its price-to-sales ratio remains constant. In fact, even half that growth rate would suffice. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Inc., and Nvidia. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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