Key Points
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iPhone maker Apple has nearly caught up with Nvidia in terms of market cap.
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The two companies’ paths to the next big market cap milestone will be as different as the paths to the $5 trillion mark were.
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Although one is more likely than the other to get to a $10 trillion valuation, it’s not necessarily the sort of contest with winners and losers that investors need to worry about.
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Apple (NASDAQ: AAPL) was the first company to reach a $1 trillion market cap, way back in 2018. Thanks to the rapid proliferation of artificial intelligence, however, hardware maker Nvidia (NASDAQ: NVDA) became the world’s first $5 trillion outfit late last year.
Now Apple’s turning heads again. Thanks to its stock’s recent gains, it joined the $5 trillion club just last week. Nvidia is still technically bigger, albeit barely, with its current market cap of $5.13 trillion.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
This market cap movement prompts a question: Although it doesn’t really matter, which of these two companies is more likely to reach a $10 trillion valuation first? I suspect it’s going to be Apple. Here’s why.
Image source: Getty Images.
Apple and Nvidia are not the same
Nvidia is still a fine growth investment. Even if we don’t know exactly what the future holds, we can confidently say that computing technology — including artificial intelligence — features prominently in it. That bodes well for this tech giant.
There’s a reason NVDA shares are priced relatively cheaply at just 14 times next year’s expected per-share profit of $15.91, though. That is — perhaps without even consciously realizing it — the market is pricing in a headwind for Nvidia’s AI business. It may also be factoring in the recent rise of AI computing competitors like Advanced Micro Devices and Qualcomm. It’s a potential problem because data centers alone now account for roughly 90% of Nvidia’s revenue.
But isn’t Apple an artificial intelligence company too? Not really. While Apple’s iPhone and its iOS certainly offer artificial intelligence-based solutions to their users, these are features rather than the crux of these profit centers.
Most iPhone owners — who consistently account for about half of Apple’s sales — simply prefer this particular smartphone for the overall experience it provides. They loved it well before AI was part of it.
And that’s the key to this ticker’s market-beating past, present, and projected growth. It’s not a hardware company in the same sense that Nvidia provides technology to institutions that perpetually shop for the most bang for their computing buck (so to speak). Rather, Apple is a lifestyle brand that’s fostered enormous loyalty from a consumer market that’s already more reliable and predictable than the corporate arena.
Consumer Intelligence Research Partners reports that 87% of current iPhone owners say their next smartphone purchase will be another iPhone, explaining the ongoing growth in the number of Apple-made devices actively used worldwide. The company reported this figure reached a new record of 2.5 billion early this year.
Knowing the sort of future growth performance they’re almost certainly plugging into, investors have also consistently supported a premium valuation for Apple stock.
Not an either/or choice you absolutely must make
It’s possible the underlying dynamic here could change in unexpected ways, pushing Nvidia to the $10 trillion mark before Apple gets there. And it doesn’t really matter which one reaches the milestone first.
Still, if nothing else, comparing and contrasting what makes these two companies tick is an important thought exercise that helps all investors establish reasonable expectations. Just keep in mind that both stocks can perform more than well enough going forward.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Qualcomm. The Motley Fool has a disclosure policy.
