Apple (NASDAQ: AAPL) is essentially the most dear company on the earth immediately with a market cap of $3.4 trillion. But a more in-depth take a take a look at the company’s recent financial performance indicates that it’s finding it difficult to position its growth right into a higher gear.
For instance, throughout the third quarter of fiscal 2024 (which ended on June 29), Apple’s revenue increased just 5% 12 months over 12 months to $85.8 billion. Analysts predict this “Magnificent Seven” stock to finish the 12 months with a 9% increase in revenue to $390 billion. Furthermore, its revenue is anticipated to increase by just 8% in the next fiscal 12 months.
This lukewarm growth at Apple shall be attributed to the company’s already massive revenue base. Moreover, Apple’s bread-and-butter end market of smartphones is already quite huge, and its growth has stagnated. Market research firm IDC estimates that the worldwide smartphone market could reach an annual growth rate of just 2.3% through 2028.
Considering that Apple is reliant on the iPhone for 52% of its revenue, it shouldn’t be surprising to see that it isn’t expected to grow at a blistering pace anymore. That’s precisely the rationale Apple could lose its crown since the world’s most dear company to Nvidia (NASDAQ: NVDA), a corporation that’s sitting on lucrative and fast-growing end markets that may help it deliver impressive growth over the next decade.
Let’s take a take a look at the the reason why Nvidia could be value greater than Apple after a decade.
Nvidia is about to benefit from massive growth opportunities in multiple end markets
Nvidia is currently the third-most priceless company on the earth with a market cap of $2.85 trillion, which means that it shouldn’t be very faraway from catching Apple. The terrific pace at which Nvidia has been growing tells us that it may perhaps indeed catch the iPhone maker over the next decade.
The company, which is known for its graphics processing units (GPUs), reported phenomenal revenue growth of 122% throughout the second quarter of fiscal 2025 to $30 billion. Nvidia has been riding the unreal intelligence (AI) wave, with its chips being deployed for training popular AI models corresponding to ChatGPT. And now, Nvidia is diversifying into areas beyond AI training so that it may perhaps sustain its handsome growth for a really very long time to return.
For instance, on its August earnings conference call, Nvidia management identified that AI inference applications have accounted for greater than 40% of its data center revenue. That is a vital trend to note as inference is the strategy of using a trained AI model to generate results from a fresh set of data. So, Nvidia has moved beyond AI training and is now getting a nice chunk of revenue from the AI inferencing space as well.
That is great news for the company’s long-term prospects as its presence in each these markets should allow it to remain a dominant force in AI chips. Investors should note that the marketplace for AI chips is anticipated to generate $300 billion in revenue in 2034, growing at an annual rate of twenty-two% over the next decade.
Nvidia reportedly controls 70% to 95% of the AI chip market, according various estimates, leaving little or no for rivals corresponding to Advanced Micro Devices and Intel. It won’t be surprising to see that trend proceed over the next decade as well, in consequence of which Nvidia could sustain its elevated levels of growth for a really very long time to return.
Furthermore, Nvidia is diversifying into lucrative markets corresponding to AI enterprise software, where it has began witnessing impressive growth. This might unlock one other lucrative growth opportunity for the company since the AI software market is anticipated to generate a whopping $1 trillion in revenue by 2032, based on Precedence Research.
Alternatively, Nvidia has other solid growth drivers in the form of the nascent but potentially massive cloud gaming space where it has already established a solid position for itself. All this explains why the company is forecast to grow at a much faster pace than Apple.
Faster growth could help the chipmaker overtake Apple’s market cap
Analysts predict Apple’s earnings to increase at a compound annual growth rate (CAGR) of 11% over the next five years. There’s a probability that the iPhone maker’s earnings growth could speed up in the long run attributable to the growing contribution of the company’s high-margin services business, but it surely surely is vulnerable to be hamstrung by the slow pace of growth in smartphone sales over the next decade.
Precedence Research estimates that the worldwide smartphone market could see 7% annual growth through 2034. While that’s rosier than IDC’s forecast, Precedence believes that the adoption of technologies corresponding to augmented reality and virtual reality are vulnerable to help the smartphone market achieve faster growth. But it surely surely is value noting that these technologies have been around for some time they sometimes haven’t been enough to inject life into the smartphone market.
However, the arrival of AI turned out to be an unlimited catalyst for Nvidia. Analysts are forecasting the company’s earnings to increase at a CAGR of 52% over the next five years, a much faster pace than what Apple is anticipated to report. Moreover, Nvidia’s end markets are set to grow at a much faster pace than Apple’s, and the good part is that the company is the dominant player in most of those markets.
So, there’s a wonderful probability that Nvidia could outperform Apple’s growth by an unlimited margin over the next decade, and the market could reward the previous with more upside in consequence and help it change into a more priceless company.
Do you will have to speculate $1,000 in Nvidia immediately?
Before you buy stock in Nvidia, consider this:
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Advanced Micro Devices, Apple, and Nvidia. The Motley Idiot recommends Intel and recommends the subsequent options: short November 2024 $24 calls on Intel. The Motley Idiot has a disclosure policy.
Prediction: 1 Stock That Will Be Value More Than Apple 10 Years From Now was originally published by The Motley Idiot