Munster: How Apple becomes the first $1 trillion company

Its market cap today is $577 billion. Where do the next $400-plus billion come from? 

In a note to clients issued early Tuesday, Piper Jaffray's Gene Munster raised his Q2 iPhone estimate (to 33 million), set a new 12-month price target ($910 per share) and -- most provocatively -- laid out a roadmap for Apple's (aapl) market capitalization to go from $576.79 billion as of Monday's close to $1 trillion by 2014.

That would be a first. The previous record for the largest market cap (price per share times number of shares) ever reached by a public company was $619 billion, set by Microsoft (msft) in 1999.

So where does Apple get the next $400-plus billion?

The short answer: Half from more money pouring into tech stocks and half from money continuing to drain from the market cap of Apple's major competitors, who have roughly $1 trillion between them.

As the chart above shows, in the past four years, Apple's market cap increased by more than $390 billion while that of six core competitors -- Research in Motion (rimm), Nokia (nok), Sony (sne), Dell (dell) Hewlett-Packard (hpq) and Microsoft -- decreased by more than $400 billion.

Turning to the next three years (2012-2014), Munster writes:

First, we believe dollars invested in US technology companies will increase ~5% y/y on average for the next three years (CY12-CY14). By comparison, dollars invested in US tech companies were up 9% y/y in 2011. Therefore, the tech sector will add ~$390 billion in market cap through 2014. We assume Apple could capture half of this market cap (from 85% in the 4 years prior).

Second, the companies we consider to be the 10 most relevant competitors to Apple (Samsung, HTC, RIMM, NOK, SNE, DELL, HP, MSFT, INTC, GOOG) represent nearly $1 trillion in market cap today. We believe 20% of that value, or ~$200 billion could shift to Apple through 2014. Thus there is potential for Apple to repeat history and add another $400 billion to its market cap. At a $1,000 share price (roughly $1 trillion in market cap) Apple would represent 26% of the total US tech market cap from 17% today.

Ironically, Munster believes that the impact of Apple's dividend -- which for years was touted as the trigger for growth funds to finally start putting money into Apple -- will be relatively small:

If we assume that 25% of large cap tech income funds buy AAPL (which we estimate to be about $150 billion), that would add around $40 billion to Apple’s market cap or 10% of the total market cap increase needed to get to a $1,000 share price. That said, we believe many income funds have already bought shares of AAPL, so the more likely impact is closer to a 5% benefit.

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions