Can Nvidia’s Blackwell chips overtake Apple to become the world’s most valuable company?
$15.7 Trillion. PwC, one of the “big four” accounting firms, believes so. Artificial intelligence (AI) May have further impact on the global economy every year This kind of boost doesn’t happen often. This technology has truly revolutionary potential, something we haven’t seen since perhaps the introduction of the Internet.
As a company uniquely helping drive this AI revolution, Nvidia (NVDA 0.78%) has already captured a large share of that growing market. The company’s market capitalization has increased by more than $3 trillion since the AI boom began in late 2022, but it is now just shy of $3.4 trillion, only surpassed by about $190 billion. apple (currently valued at $3.57 trillion) as the world’s most valuable company.
Will it be able to stay ahead of iPhone makers?
Nvidia’s Blackwell is going to be big
Nvidia’s dominance in the industry is primarily due to its superior technology. The company’s chips are consistently faster and more efficient than those offered by its competitors, which has led to its control of about 90% of the market. This means that Nvidia’s net income from the AI chip market last quarter was about 25 times the net income of its closest competitor. advanced micro device.
Nvidia knows this advantage is fragile and must do everything it can to maintain its advantage. To achieve this, the company has committed to updating its chips annually (instead of every two to three years), which is certainly a tall order. Currently, the company’s current Hopper chips are still selling like hotcakes — Elon Musk ordered 100,000 chips a while ago to build the world’s fastest supercomputer — but Nvidia’s new Blackwell Chips will begin shipping soon.
CEO Jensen Huang said demand for the new chips was “extraordinary” and that, according to some reports, the company had already sold out for the next 12 months. Nvidia is trying to expand production in partnership with. foxconn The world’s largest Blackwell production facility will be built in Mexico. Incredibly, the analyst morgan stanley Blackwell previously announced projects that could bring in $10 billion in additional revenue. this year It ends. This is much higher than the company’s own guidance, so take this forecast with a grain of salt, but it’s clear that demand is very strong. We’ll see how many chips the company can actually ship.
Apple is having growing pains
Apple is growing, especially in services, and Wall Street seems relatively bullish. However, reports that sales of the company’s latest model “iPhone” were not so strong are a cause for concern. There are signs that sales may have fallen in China, a major market, and domestically the company is relying on an AI integration called “Apple Intelligence,” but it needs more to drive upgrades and boost sales. I need a new iPhone. The jury is still out on whether this change is impressive enough for consumers to justify an upgrade.
The company’s earnings release, scheduled for later this month, will tell us a lot. Hopefully, the company could grow iPhone sales while continuing to leverage service areas like Apple TV, Apple Music, and the Apple Store.
Nvidia will be ahead of the curve
Given Nvidia’s Blackwell rollout and reliable reporting on demand that mirrors last year’s demand that fueled its incredible revenue growth, Nvidia’s stock price has risen faster than Apple’s in the race for the world’s largest market capitalization. I think he will take the top spot. .
However, there’s a wrinkle here. The valuations of the two companies’ stocks must be taken into account. Take a look at this chart showing the stock prices of two companies. Price earnings ratio (PER).
NVDA PE Ratio Data by YCharts
Nvidia stock is trading at a significant premium, and that’s something to keep in mind. At such a valuation, investors expect significant growth. If Nvidia can’t maintain its impressive growth rate, the stock could fall back to earth. So far, growth doesn’t seem to be slowing down anytime soon, and with NVIDIA in high growth mode, we may need another metric to gauge the stock’s potential.
The PEG ratio (a company’s P/E divided by its expected growth rate) takes growth into account and is a better metric here. Conventional wisdom holds that stocks with a PEG ratio of less than 1 are trading at a discount. Nvidia’s PEG ratio is 1.1, while Apple’s is 2.4, suggesting that Nvidia is a bargain here. If Nvidia continues to grow, its high P/E ratio will be easily justified and Apple will have a hard time retaining its number one spot.
Johnny Rice has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, and Nvidia. The Motley Fool has a disclosure policy.
