Apple joined Nvidia in the $5 trillion club last week, and Nvidia's lead is now slim. Motley Fool analyst James Brumley suspects Apple will reach a $10 trillion valuation first, citing customer loyalty and Nvidia's reliance on data centers.
Apple joined the $5 trillion club just last week, following its recent stock gains. Nvidia remains technically bigger, albeit barely, with a market cap of $5.13 trillion.
Brumley, writing for Motley Fool, suspects Apple will be first to $10 trillion, though he says it doesn't really matter which company gets there first. Apple was the first company to reach a $1 trillion market cap, in 2018, while Nvidia became the first $5 trillion company late last year.
Nvidia's valuation reflects a possible AI headwind
Brumley calls Nvidia a fine growth investment, but he points to its price of 14 times next year's expected per-share profit of $15.91. In his view, the market may be pricing in a headwind for Nvidia's AI business.
The market may also be factoring in the rise of AI computing competitors such as Advanced Micro Devices and Qualcomm. That is a potential problem because data centers alone account for roughly 90% of Nvidia's revenue.
Apple's case rests on consumer loyalty
Brumley argues that Apple is not an AI company in the same sense, because AI features in the iPhone and iOS are features rather than the crux of its profit centers. He describes Apple as a lifestyle brand with a consumer market that is 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. Apple reported that the number of its devices in active use worldwide reached a record 2.5 billion early this year.
Brumley adds that the dynamic could change in unexpected ways, pushing Nvidia to $10 trillion first.
Source: Motley Fool
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