Predicting how a business will perform in the next five to 10 years used to be quite difficult. There were simply too many variables and market uncertainties to account for, and the longer the time frame you chose, the more challenging it became.
But now, with so much data at your fingertips and dozens, if not hundreds, of artificial intelligence (AI), machine learning (ML) algorithms, and data science frameworks dedicated to predicting the market (as a whole or its various elements), it should have become easier.
Still, instead, it has gotten more difficult. The reason is that more complex variables like AI and ML themselves and complex factors are forcing the market to evolve at a more rapid pace.
That said, it may be possible to speculate if Canada’s e-commerce giant Shopify (TSX:SHOP) will be able to surpass the American electric vehicle (EV) giant Tesla (NASDAQ:TSLA) by the end of this decade. Tesla is currently more than five times the size of Shopify in terms of market capitalization.
The case for Tesla
Tesla is still the largest EV producer in the world, and in terms of the number of units sold, Tesla Models Y and 3 dominated other manufacturers. The company is fully leveraging its early bird advantage, but it may also face certain challenges that may cause its market valuation to drop in the coming years. Most of these challenges are external/market-oriented.
The first is the slacking EV demand. The number of units sold is increasing, but the demand, which EV makers like Tesla use to manage their entire supply chain and production, is not growing at the expected pace. One main reason is that the early adopter market is saturated, and the mainstream market is not yet ready for EVs, especially in countries/regions where the support infrastructure has not yet matured.
This is just one of the factors behind Tesla losing over half of its valuation from its 2021 peak, and it’s still in the bear market phase.
There is also a wild card factor that can cause not just Tesla but a comprehensive range of EV and battery metal stocks to plummet — a breakthrough in hydrogen production, transmission, and storage.
Right now, it’s a dangerous fuel to handle and expensive to produce, but even if one of these problems is solved and hydrogen-fueled zero-emission vehicles start entering the market at an expedited rate, they may impact EV demand even more.
The case for Shopify
Unless Tesla stock falls brutally enough to lose more than 80% of its current value (and Shopify keeps hovering where it is), Shopify stock will have to grow at a compelling rate to surpass Tesla’s market valuation.
Shopify’s explosive growth in the past is currently the strongest endorsement that the company might be able to do it, but there are other factors in play as well, primarily AI and the Internet of Things.
Both of these technologies can transform e-commerce as we know it, and if Shopify can leverage these technologies the right way, it may have a strong chance of success. It’s already investing in AI, and the IoT market might open new growth avenues for the company, allowing it to grow its consumer base and revenues organically.
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Foolish takeaway
Several different factors have to align just the right way for Shopify to be worth more than Tesla by the end of 2030, but considering the way the market is evolving, it’s not a far-fetched prediction. But even if Shopify falls short of the market, it would still be one of the most compelling tech stocks in Canada if it keeps growing at its current pace.
