Uploaded December 2025 | Updated September 2026, 1 week ago
A few weeks ago, Nvidia hit a $5 trillion market cap threshold, and while it has retreated since, we have seen a wave of companies breaching the trillion dollar market cap level. When these thresholds are reached, there are two opposing responses, with one (from the value investing group) arguing that this is clearly an overpricing and the other arguing that it is reflective of a changing world. Rather than indulge this debate, where no one wins, I look at reframing the market capitalization of a company in terms of the revenues it will need to justify that market cap, with net margins and returns on equity as drivers. I compute the breakeven revenues for the twelve largest market cap companies in the world, and then put those revenues to what I call the 3P test (Is it possible? Is it plausible? Is it probable?).
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/TrillionMktCap.pdf
Blog Post:
Spreadsheet to compute breakeven revenues (given market cap): https://pages.stern.nyu.edu/~adamodar/pc/blog/MktCapBreakeven.xlsx
A few weeks ago, Nvidia hit a $5 trillion market cap threshold, and while it has retreated since, we have seen a wave of companies breaching the trillion dollar market cap level. When these thresholds are reached, there are two opposing responses, with one (from the value investing group) arguing that this is clearly an overpricing and the other arguing that it is reflective of a changing world. Rather than indulge this debate, where no one wins, I look at reframing the market capitalization of a company in terms of the revenues it will need to justify that market cap, with net margins and returns on equity as drivers. I compute the breakeven revenues for the twelve largest market cap companies in the world, and then put those revenues to what I call the 3P test (Is it possible? Is it plausible? Is it probable?).
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/TrillionMktCap.pdf
Blog Post:
Spreadsheet to compute breakeven revenues (given market cap): https://pages.stern.nyu.edu/~adamodar/pc/blog/MktCapBreakeven.xlsx
