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On December 5th, US Treasury Secretary Janet Yellen made a telling statement. In an interview with Punchbowl News, the former Fed Chair noted that elevated interest rates pose “a somewhat greater challenge” for monetary policymakers.

Yellen is referencing enormous expenditures that now go to debt service, skyrocketing to $981.3 billion in Q3 2023. This is triple that in the aftermath of the Great Financial Crisis of 2009. Current Fed Chair Jerome Powell had previously noted that “the federal budget is on an unsustainable path.”

These signals point to the end of the Fed’s hiking cycle in the first half of 2024. Fed fund futures currently price in the first rate cut as early as May 2024, at 78% probability. In turn, lower interest rates lead to cheaper borrowing, which leads to more investment in growth.

Companies with over $1 trillion market cap have deep pockets to materialize that growth and corner their respective markets. With that horizon in mind, which companies could return to their all-time highs next year the fastest?

Amazon.com (Nasdaq: AMZN)

Valued at $1.53 trillion, this mega e-commerce, logistics, and cloud computing platform reached an all-time-high of $186 in July 2021. Beneficiary of the lockdown period, which boosted online shopping and remote work, Amazon became an essential infrastructure. 

This sparked a 37.62% year-over-year net sales revenue growth in 2020. Yet, as of Q3 2023 earnings report, Amazon’s net sales are still in the double-digit range, at 13% yoy. Amazon Web Services (AWS) followed suit with a 12.3% net sales increase. 

During these three years, undergoing both the stimulus/lockdown boost and the Fed hiking cycle, Amazon’s debt-to-equity ratio lowered. It was 2.39 in March 2020. At 1.66, Amazon’s long-term debt is $303.91 billion vs. $182.97 billion shareholders’ equity. 

Although this points to AMZN stock being overbought, it also points to continued high growth expectations from investors. In other words, Amazon has positioned itself as the Windows operating system of e-commerce platforms.

Based on 44 analyst inputs pulled by Nasdaq, AMZN stock is a “strong buy.” The average AMZN price target is $177 vs the current $147. The high estimate is $210, while the low forecast is $145 per share, which is just under the price at press time.

Apple (Nasdaq: AAPL)

Similar to the dynamic between Michael Saylor’s MicroStrategy and Bitcoin, a proxy relationship exists between Berkshire Hathaway and Apple, now valued at $3 trillion. Warren Buffett steered the company into having a 50% Apple weight. This is telling, given that Berkshire has a long track record of outperforming the S&P 500 market benchmark.

In addition to cornering the premium tech market, Apple earned that stake by having one of the most generous capital feedback loops. In fiscal 2023, Apple repurchased $77.55 billion worth of AAPL shares. In the last ten years, the stock buyback program accounted for a record-breaking $604 billion.

By continually reducing the number of outstanding shares, Apple improves its price-to-earnings (P/E) ratio. Against the average P/E ratio of 32.3 in the tech sector, Apple stands at 31.76 with a 29.68 forecast in 2024. Presently, under the 70 Relative Strength Index (RSI), AAPL shares are teetering on overbought in the short run.

However, this may also be a sign of FOMO recovery. Based on 31 analyst inputs pulled by Nasdaq, AAPL stock is a “strong buy.” The average AAPL price target is $203.7 vs current $196. The high estimate is $250, while the low forecast is $150 per share.

Nvidia (Nasdaq: NVDA)

The video game card manufacturer turned data center AI supplier only recently joined the $1 trillion market cap club, now at $1.19 trillion. Following revenue forecast beatdowns due to unrelenting AI hype, NVDA stock is tracking to conclude 2023 with a 236% gain.

Becoming such a focal point has led to speculation that NVDA rose too fast to avoid a downward price correction. Nvidia’s exceedingly high P/E ratio of 194.52 suggests this to be the case against the 43 P/E forecast for 2024. 

The uncertainty about USG chip export controls against China further points in this direction. Previously, Nvidia had reintroduced tweaked China-only GPUs to carry on the shareholder’s bottom line. With that said, the talent behind Nvidia’s proven chip-making track record is secure in a world that increasingly needs chips for generative AI.

Taking into account further chip export control news, based on 38 analyst inputs pulled by Nasdaq, NVDA stock is a “strong buy.” The average NVDA price target is $661 vs the current $481. The high estimate is $1100, while the low forecast is $560 per share.

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