Nvidia (NVDA 0.56%) and Apple (AAPL -0.57%) were two of the best-performing tech stocks over the last decade. Nvidia returned 8,100%, while Apple stock climbed 985%.
As those returns indicate, Nvidia was the faster-growing business. A lot of this has to do with Nvidia being a smaller company than Apple and selling its high-powered graphics processing units (GPUs) into the growing data center market driven by the adoption of artificial intelligence (AI) and other high-performance computing applications.
Nvidia estimates its growth opportunity at more than 20 times its current annual revenue, so it still has a high enough ceiling to outpace Apple for several more years. But Apple is not sitting still, and the iPhone maker already has a market cap (stock price times total shares outstanding) of $2.6 trillion, compared to $660 billion for Nvidia.
To answer the main question here, the first thing to do is establish a future value for Apple using reasonable growth and valuation assumptions. Then, you can better determine how much Nvidia's stock needs to climb to surpass Apple in market value.
Projecting Apple's future worth
The rapid adoption of the iPhone was responsible for Apple's growth for most of the last decade. But in recent years, the smartphone market slowed as it becomes more saturated worldwide.
The higher margins from services sales is a key reason why Apple stock continued to climb in recent years. From fiscal 2017 through fiscal 2022, services increased from 14% of total revenue to nearly 20%. The higher-margin sales, along with management's share repurchase program, helped more than double Apple's earnings per share (EPS).
Both hardware and services growth could power Apple's stock higher for the foreseeable future. In Apple's last business update, CFO Luca Maestri said the services business still has a "large long-term opportunity."
On the hardware side, Apple has a pipeline of new products rumored to be in development, including a mixed-reality headset that could be unveiled later this year, with Apple smart glasses coming later. In addition, Apple has been long rumored to be working on a car. All these products might be unveiled within the next five years.
Apple generated earnings per share of $6.11 in fiscal 2022. If Apple's improving margins from services and continued growth in hardware can grow its earnings per share around 15% per year, consistent with previous years, it would have earnings of $16.25 per share in 2030.
If the stock is trading at a price-to-earnings ratio of 25, which is slightly lower than its current multiple of 28, that would translate to a share price of $406, or a market cap of $6.4 trillion.
Nvidia is chasing a monster
You can start to see the challenge for fast-growing Nvidia to keep up with Apple. Nvidia's stock would have to rise by at least 800% from today's share price to match Apple's projected market cap in seven years.
Sure, it's possible Apple may not grow its earnings as much as projected. If earnings grow slower, say 10% per year, consistent with Wall Street estimates, Apple won't be worth as much, and Nvidia will have an easier time catching up.
But this goes both ways. Nvidia is operating in a competitive semiconductor industry, and the graphics specialist is also prone to cycles in chip demand, as its recent revenue performance shows.
NVDA Revenue (Quarterly) data by YCharts
Nvidia's second-largest business -- gaming GPUs -- experienced a significant decline in revenue last year due to weakness in consumer demand. Nvidia is also starting to see slowing growth in its largest business, data centers, due to tightening cloud spending budgets over macroeconomic headwinds.
Which is the better stock to buy?
Although it trades at an expensive 59 times this year's earnings estimates, it's not inconceivable that Nvidia could become the most valuable company in the world someday. But it is unlikely to outpace Apple in the timeframe referenced.
A safer prediction to make is that, with AI emerging as a bigger opportunity than the market believed just a year ago, Nvidia stock has enough momentum powering its business over the long term to outperform Apple stock just as it has done over the last 10 years.
