Nvidia (NVDA +5.93%) recently hit a $3 trillion market cap and is now among the three most valuable companies in the world. Right above it in valuation is Apple (AAPL +1.18%), with a market cap of just under $3.4 trillion, while Microsoft is currently in the top spot at just over $3.4 trillion.
Though Microsoft is a tech stalwart and a safe stock, I think Apple and Nvidia both possess better growth prospects in the long run. So which of them is the most likely to reach a $4 trillion valuation first?
NASDAQ: NVDA
Key Data Points
Nvidia sports a mammoth growth rate
It's hard to bet against Nvidia when you consider just how well its business has performed of late. The company is the leading provider of the artificial intelligence (AI) chips that other tech companies need to develop their next-gen software and models. And with AI infrastructure and development still in its early stages, Nvidia could be on the cusp of much more growth.
That's in stark contrast to Apple, which has been struggling lately to grow its top line at all.
Quarterly revenue growth data by YCharts.
But there is reason to expect that the gap between these growth rates will shrink. While Nvidia is a growth beast, it isn't likely to continue tripling its revenue on a year-over-year basis. As it starts lapping its latest huge numbers, it will become more difficult for it to keep its growth rate so high. And with so many companies loading up on AI chips, Nvidia may be punching above its weight right now. As more competing chips come to market in quantity and chip buyers potentially ease up on their AI-related spending, its growth rate could come down drastically.
On the flip side, Apple's growth rate should improve thanks to its recently unveiled Apple Intelligence, which will inject AI capabilities into its latest iPhones, Macs, and iPads. That will give users an incentive to get the latest Apple devices when they come out later this year, so it could be the catalyst for a strong upgrade cycle. As Apple dives deeper into AI and enhances its services, it has the potential to tap into more growth opportunities down the road.
NASDAQ: AAPL
Key Data Points
Apple has the friendlier valuation
What may be the biggest impediment for Nvidia's stock to rally much higher in the near future is its extremely high valuation of more than 70 times earnings.
AAPL PE Ratio data by YCharts.
Trading at a much more modest P/E ratio of around 34, Apple could have more room to rise, especially if its growth rate improves. Meanwhile, Nvidia's multiple means it will have a high bar to meet each and every time it reports earnings. That leaves the stock vulnerable to a sell-off should it have a quarter that falls short of expectations or if management offers a forecast that isn't sufficiently rosy.
While things are going well for Nvidia today, that doesn't mean it will be able to maintain its current pace.
My prediction: Apple hits $4 trillion first
Both of these stocks make for good long-term investments, but if I were buying shares today, I would pick Apple over Nvidia.
There is a lot of excitement around Nvidia now, and that has me concerned that expectations for it may have climbed too high. Apple may not be as popular with growth investors today, but it shouldn't be counted out as it still has a lot more room for growth left.
And Apple is the stock that I think will hit $4 trillion first, beating out both Microsoft and Nvidia.
