It's the time of year for making predictions about the coming new year. I agree with the Danish proverb, "Prediction is difficult, especially when dealing with the future."
However, I'll go out on a limb and make a prediction about the new year. I predict that Nvidia (NVDA +2.57%) will become the first $4 trillion stock in 2025.
NASDAQ: NVDA
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Why not Apple or Microsoft?
At first glance, my prediction might seem foolhardy. Apple (AAPL 0.01%) is closer to reaching a $4 trillion market cap than Nvidia, and Microsoft (MSFT 0.60%) isn't far behind Nvidia. Apple's share price would only have to rise about 4% to hit the threshold, while Microsoft would require a 22% gain. Nvidia's shares would need to soar nearly 21%.
So why do I predict Nvidia will reach the mark first instead of Apple or Microsoft? For one thing, I think Apple's and Microsoft's shares will tread water until the two companies report their next quarterly earnings results. The Federal Reserve's hints about fewer interest-rate cuts in 2025 are likely to put a damper on the momentum these two stocks have enjoyed in recent weeks.
Both Apple and Microsoft provide their next quarterly updates before Nvidia does, and positive results could catapult either stock past the $4 trillion mark. That's especially possible for Apple because its market cap is already so close.
NASDAQ: AAPL
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However, I have a hunch that Apple's fiscal 2025 Q1 results could be disappointing. Why? Early reviews of Apple's new generative AI capabilities haven't been great. A survey conducted by SellCell.com found that 73% of iPhone users thought the AI features didn't add much, if any, value.
Granted, this survey was taken before iOS 18.2 came out with additional Apple Intelligence capabilities. But the overall buzz I've seen online is that generative AI isn't likely to spark a huge iPhone upgrade supercycle that some analysts expected -- at least not yet.
I wouldn't be surprised if Microsoft beat expectations with its next quarterly update. However, the general tone in management's comments in the last earnings conference call makes me skeptical that the company will deliver the kind of results needed to provide a major catalyst.
NASDAQ: MSFT
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What it will take for Nvidia to reach $4 trillion first
My prediction will fall flat on its face if my assumptions about Apple and/or Microsoft prove wrong. Let's assume, though, that neither stock regains enough momentum to achieve a market cap of $4 trillion in the near term. What will it take for Nvidia to reach $4 trillion first? I think there's a one-word answer: Blackwell.
Blackwell is Nvidia's newest graphics procesing unit (GPU) architecture. The company says that it can run trillion-parameter large language models (LLMs) at up to 25 times lower cost and energy consumption than the Hopper GPU platform. Nvidia began shipping Blackwell GPUs in Q4.
Nvidia CEO Jensen Huang said in his company's Q3 earnings call, "Blackwell demand is staggering." He told CNBC in an October 2024 interview that the demand for the powerful AI chip is "insane." Maybe Huang was being overly exuberant, but I think he was more likely just stating the facts.
I foresee investors becoming increasingly excited about the prospects for Blackwell during January and the weeks in February leading up to the company's Q1 update. This would reverse Nvidia's current stock slump and possibly put it within striking distance of Apple's market cap. Better-than-expected Q1 results, combined with an especially upbeat sales forecast for Q2, could easily enable Nvidia to cross the $4 trillion market, in my view.
Could Nvidia top $5 trillion in 2025?
I/O Fund analyst Beth Kindig recently wrote that she believes Nvidia's shares could skyrocket 70% in 2025. If she's right, the chipmaker's market cap would approach $5.6 trillion next year.
I'm not as bold of a forecaster as Kindig. However, she may be right. If she is, I suspect my prediction about Nvidia reaching $4 trillion first is more likely to be fulfilled.
