Although Microsoft (MSFT 1.92%) held the title for a few months, Apple (AAPL 0.38%) briefly regained its crown as the world's largest company by market cap this month. But then this week, Nvidia (NVDA 3.17%) passed it for the first time. As of Thursday, the Windows maker was back in first place again, but with all three companies holding market caps of around $3.2 trillion, in the near term, their rankings within the top three could shift often.
But what will matter more to investors is where stocks are heading over the medium and long terms. So which of them is most likely to hold the title a year from now?
The case for Apple
Apple was significantly trailing Microsoft until its Worldwide Developer Conference a couple of weeks ago. Although it announced several things during the event, the biggest launch by far was Apple Intelligence -- essentially, Apple's take on artificial intelligence (AI). Those features won't directly generate more revenue for Apple, but the thing to note is the generative AI features will only be available on its latest model smartphones, the iPhone 15 Pro and 15 Pro Max -- and of course, on the generations that follow.
This is huge. The current estimates are that more than 90% of active iPhones are older models. So, if Apple Intelligence turns out to be a game changer, it will drive an upgrade cycle stronger than any Apple has experienced since early in the pandemic.
If that new demand wave arrives, Apple's sales and profits will rocket. That's a compelling argument for the proposition that it will once again be the world's largest company a year from now.
The case for Microsoft
Microsoft overtook Apple as the world's largest company due to its heavy involvement with generative AI. Once Microsoft realized the impact this technology could have, it quickly developed an integration with the market leader, OpenAI's ChatGPT, for its Microsoft Office products. To access these features, businesses or consumers need to pay an extra fee, which has boosted Microsoft's revenue stream.
NASDAQ: MSFT
Key Data Points
In addition to Copilot, Microsoft's cloud computing wing has been on fire. Most companies don't have the in-house capacity to run AI workloads, and would rather not spend a fortune to build out that infrastructure. Instead, they rent computing power from cloud computing providers like Microsoft Azure, which gives them access to the hardware they need.
The wave of demand this has generated has been huge for Microsoft and will likely continue. However, the effect it's having is already apparent to investors, and it's unlikely to get any better from this point on.
The case for Nvidia
Nvidia has been an absolute rocket ship since the start of 2023. The massive demand for AI has driven a parallel surge in demand for the most powerful graphics processing units (GPUs), which can provide the high-speed computational power that software requires. This has caused a surge in revenue and profits for Nvidia -- the leading maker of those cutting-edge chips -- taking it from a company worth less than $500 million to one of the world's largest in a year and a half.
AAPL Market Cap data by YCharts.
However, there are some concerns about Nvidia's ability to maintain its valuation. Chipmaking is a cyclical business, and some investors are worried that demand for those GPUs will drop, and that the bottom will fall out of the stock.
This is, in my view, a misguided notion. Nvidia is still seeing demand for its GPUs grow. Furthermore, it recently launched the H200 GPU, which supersedes the incredibly popular H100 with better efficiency and performance. Additionally, the lifespan of a data center GPU is estimated to be between three and five years. As such, investors should expect a refresh cycle will likely kick off relatively soon, driving continued demand for Nvidia's GPUs.
This argument may be a bit more shaky than the other two, but there's still a strong case to expect that a year from now, Nvidia will be the world's largest company.
The verdict
The answer to the question of which of these three will be the biggest depends on how "must-have" consumers deem the Apple Intelligence features to be. I'd guess Apple will hold the No. 1 spot a year from now unless Apple Intelligence is an absolute flop. Its revenue streams have remained steady despite sliding demand for its iPhones. This new catalyst could kick-start their sales and the stock to new levels.
If it's not Apple, I'd say Microsoft is a more likely leader than Nvidia. However, Nvidia is the biggest wildcard here, as it could see the already incredible demand for its GPUs go higher, which could ignite another run-up in the stock.
Microsoft would be the most conservative pick, but it would still be a good one if the AI buzz wears off.
