Will Nvidia Be Worth More Than Apple by 2025?

Nvidia (NVDA 6.18%) stock's outstanding surge in the past year has led to a massive jump in its market cap, and the semiconductor giant is now counted as one of the world's largest companies. More specifically, Nvidia's market cap of $2.22 trillion means it is now the third-biggest company globally, ranking just behind Apple (AAPL -0.35%), which has a market cap of $2.61 trillion.

It is worth noting that these tech giants have experienced divergent fortunes on the stock market in 2024. While shares of Nvidia shot up 79% this year already, Apple stock has moved in the opposite direction, dipping 12% as of this writing. As a result, Nvidia is now within touching distance of Apple's market cap.

NVDA Market Cap data by YCharts.

But can Nvidia stock continue soaring and overtake Apple's market cap by next year? Let's find out.

Nvidia is set to grow at a much faster pace than Apple

A key reason Nvidia's market cap has grown while Apple's has declined is the different trajectories of the two companies. Nvidia is making the most of the artificial intelligence (AI) chip market, which is growing at a terrific pace. According to third-party estimates, the AI chip market is estimated to clock an annual growth rate of 38% through the end of the decade and generate $207 billion in annual revenue.

Nvidia's fiscal 2024 revenue increased 126% to $60.9 billion thanks to the lucrative AI data center graphics processing unit (GPU) market, where it dominates with an estimated market share of 98%, according to Wells Fargo. Nvidia is also enjoying terrific margins in AI GPUs as its chips are being sold for tens of thousands of dollars. This is reflected in the company's bottom-line performance, with its fiscal 2024 earnings jumping 288% to $12.96 per share.

On the other hand, the smartphone market is Apple's bread and butter. The iPhone produced 58% of its total revenue in the first quarter of fiscal 2024 (which ended Dec. 31, 2023). However, Apple's top line increased just 2% year over year to $119.6 billion during the quarter, while earnings were up 16% to $2.18 per share. Its iPhone revenue increased 6% year over year during the quarter, while sales of iPads and wearables fell. Also, sales of Apple's MacBooks remained flat last quarter.

A closer look at the end markets Apple serves tells us why it is growing more slowly than Nvidia. The smartphone market, for instance, is expected to grow by only 2.8% in 2024, as per IDC. The researcher estimates that smartphone sales will likely increase in the low single digits over the next five years. Tablet sales, meanwhile, are declining, while the personal computer (PC) market is forecast to turn around this year following steep declines in the past couple of years.

Additionally, Apple doesn't enjoy Nvidia-like dominance in the markets it serves. Though Apple was the top seller of smartphones in 2023, its market share stood at 20.1%. Last year, Samsung was the second-biggest smartphone company, with a 19.4% market share. Apple was the fourth-largest company in PCs last year by shipments, controlling just 8.5% of this market.

So, the bottom line is Nvidia is in pole position to capitalize on a fast-growing opportunity in the form of AI chips. Apple, however, is operating in mature markets where there are multiple contenders. As a result, it is unsurprising to see why Nvidia's revenue and earnings are forecast to increase much faster pace than Apple's.

Source: YCharts.

Also, Apple's earnings are expected to grow at a much slower annual rate of 11% over the next five years compared to the 36% annual earnings growth Nvidia is expected to deliver during the same period. As such, seeing the market reward Nvidia with more gains won't be surprising. Apple stock, on the other hand, could remain in the doghouse thanks to the slow-growing nature of the smartphone market and recent developments suggesting the company may be late to the AI game.

iPhone sales in China reportedly fell an alarming 24% in the first six weeks of 2024, according to Counterpoint Research. Huawei gained at Apple's expense and recorded a 64% spike in sales during the same period. Meanwhile, Apple's biggest smartphone competitor, Samsung, has already jumped onto the AI smartphone bandwagon with its latest Galaxy series of smartphones. The good news for Samsung is that it expects to sell more flagship phones than its original forecast, and AI seems to be playing a key role in driving this performance.

This gives Samsung an advantage over Apple, which is yet to launch an AI-focused smartphone.

Which one will be the bigger company next year?

Apple has already lost the title of the world's largest company by market cap to Microsoft. And now, it won't be surprising to see Nvidia displace Apple and climb up the rankings.

As shown in the table above, Nvidia's revenue is expected to jump to almost $131 billion in fiscal 2026 (which will coincide with the majority of calendar 2025). Nvidia is trading at 35 times sales right now. While that's expensive, Nvidia has been able to justify its expensive valuation with outstanding growth in recent quarters.

The solid opportunity in AI chips means the market could also reward Nvidia with a rich sales multiple in the future. Assuming Nvidia maintains a discounted sales multiple of 25 next year and generates $131 billion in revenue, its market cap could increase to $3.27 trillion.

Apple, for comparison, trades at 7 times sales, slightly higher than its five-year average sales multiple of 6. Giving Apple a higher sales multiple doesn't make sense, considering its slower growth. Assuming it generates $413 billion in revenue next year and maintains its current sales multiple, its market cap could go to $2.9 billion, indicating Nvidia seems set to become a bigger company than Apple by 2025.

That's why investors looking to buy one of these "Magnificent Seven" stocks have an easy choice about where to put their money.