apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) are two of the most valuable companies in the world. Their market capitalizations are well over $3 trillion each, and it may only be a matter of time before companies worth $4 trillion emerge. That could happen within the next year.
The first stock to reach that pinnacle is likely to be one of these two tech giants. But is it Apple or Nvidia? Which one do you think is better to buy in the future?
The advantage of Apple being the first to reach $4 trillion is that it has a higher market cap than Nvidia as of last week (nearly $3.7 trillion compared to the chipmaker’s $3.4 trillion). But that’s not the only reason Apple might get there first.
Nvidia is currently experiencing huge growth with artificial intelligence (AI). That’s because many technology companies rely on Nvidia’s high-performance chips for AI-related development. But other companies are also developing their own chips, which could create competition for Nvidia in the future.
For example, Apple uses Amazon chips to develop its AI models. Meanwhile, China recently launched an antitrust investigation into Nvidia, which could impact the company’s long-term growth opportunities in that market. Although Nvidia has been performing well recently, there could be challenges that weigh on the business in the not-too-distant future.
Apple, on the other hand, could soon receive a major AI boost by adding AI to the functionality of its phones. The company announced Apple Intelligence, but many new features, including enhanced Siri functionality (editing photos, extracting PDFs from emails, etc.) won’t be available until the new year.
Once these features are rolled out, you’ll likely see more interest on social media, more phone upgrades, and more revenue for your business. If that happens, the stock could be enough to reach a market cap of $4 trillion.
Nvidia’s stock price has risen more than 330% over the past three years, and many investors are concerned that the stock is nearing its peak. But given the impressive results the company has produced, that valuation isn’t all that outlandish.
Based on analyst forecasts, NVIDIA’s forward price/earnings ratio (P/E) is 33 times, which is only slightly higher than Apple’s premium. But while the iPhone maker has been growing sales at single-digit rates, Nvidia’s sales soared 94% in its most recent quarter ending Oct. 27.
It’s much easier for investors to pay a premium for a company that’s growing rapidly than it is for a company like Apple whose sales and profits aren’t necessarily skyrocketing.
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