The race for the number one position in global market capitalization gets tougher as Nvidia (NVDA, Financial) and Apple (AAPL, Financial) slug it out. Powered by AI, Nvidia is fast closing in on Apple, the world’s most valuable company.
Since 2011, Apple has been valued based on its collection of devices, such as iPhones and MacBooks, for an entrenched ecosystem. But its growth has tapered off, and revenue has remained stagnant in the past two years. Yet, Apple’s stock has been up 34% in three years, and it has questioned whether its high valuation makes sense after it has seen limited earnings growth.
For example, Nvidia’s GPUs power AI model training, engineering simulations, and other such applications facilitate its meteoric rise. Despite earning only $30 billion in 2023, the company is now projected at over $100 billion, and analysts see lots more growth ahead. Even far above Apple’s 22% projected earnings per share growth, Nvidia’s earnings per share are expected to rise by 50%.
A P/E comparison: Since Nvidia is expanding quite fast, its premium P/E (Price to earnings) ratio of 46% compared to Apple justifies it. If Nvidia continues its pitch, analysts say it will be sixth time lucky, dethroning Apple as early as 2025.
For investors, the rivalry poses a critical decision: Stick with Apple’s steady dominance or bet on Nvidia’s disruptive potential as the new AI market leader. The race also reflects changes in tech leadership, as those driving value creation remain in innovation.
This article first appeared on GuruFocus.
