Chip designer Nvidia Corp. is edging closer to surpassing Apple Inc. as the world’s second-most valuable company by market capitalization, with the gap between the two narrowing to just over $250 billion.
When the market closed last Friday (May 31), Nvidia's stock fell 0.78% to $1,096.33 per share, while Apple's stock rose 0.50% to $192.25. At that price, Nvidia's market capitalization was $2.69 trillion, while Apple's was $2.94 trillion.
By early 2024, Nvidia’s market capitalization will be $1.18 trillion, while Apple’s will be $2.84 trillion. Observers say another price increase—a little over $9%—could close the gap with the iPhone maker. Assuming Apple’s stock remains unchanged, Nvidia’s share price would need to hit $1.198 to become the world’s second-most valuable company.
That target is certainly achievable. Based on 40 Wall Street analysts’ forecasts for Nvidia’s 12-month price target, the stock could reach an average of $1,197.64 (up $9,24% from its most recent close), with some forecasts reaching as high as $1,400 (up $28%).
Apple stock has been moving at a slower pace than Nvidia: its shares have gained just 3.6% in the first five months of 2024. Nvidia’s stock, meanwhile, has been a fairly rapid and sustained rally – investors in the company have enjoyed a 127% gain in the past five months.
A $1,000 investment in Nvidia stock at the beginning of the year would now be worth $2,275, while a similar investment in Apple would be worth just $1,036.
Is Apple falling behind?
2024 has been a rocky year for Apple so far in the stock market, losing the top spot to Microsoft in January and could soon fall to third place if Nvidia keeps up its momentum.
Growing competition in China and the lack of a strategy to integrate artificial intelligence (AI) into iPhones and other products have contributed to Apple’s stock’s decline, while the stock’s gains have also lagged the Nasdaq, which has gained more than 13% since the start of 2024.
With Nvidia continuing to grow strongly and surpassing analysts’ expectations with impressive Q1/2024 results, the company could well surpass Apple. According to analysts at Morgan Stanley, Nvidia’s growth momentum “shows no signs of slowing” and “remains very strong through its product transition.”
But for CNBC’s “Mad Money” host Jim Cramer, the question isn’t whether Nvidia will surpass Apple: He even thinks the chip designer could surpass Microsoft. According to Cramer, Nvidia’s potential is so great, and its products are becoming an increasingly integral part of the technology infrastructure, that it could become a company that reshapes the future of the technology industry.
Nvidia's rapid rise may have some worried that valuations are inflating. But fund manager Louis Navellier thinks otherwise. He says it's hard to call it a bubble because Nvidia's price-to-earnings (P/E) ratio has actually fallen over the past year as earnings growth has consistently been higher than Wall Street forecasts. Financial services firm LSEG says Nvidia's P/E ratio is now 37, down from 48 a year ago due to higher earnings forecasts.
Not everyone is convinced that Nvidia will beat Apple, however. Deepwater Asset Management’s Gene Munster said investors are “largely in denial” about the iPhone maker’s AI strategy ahead of expected announcements at Apple’s upcoming Worldwide Developers Conference (WWDC), which runs from June 10 to 14. He believes Apple’s stock will outperform Nvidia next year.
Source: Bnews
