Nvidia’s Expansion into AI Chip Market

While Apple grapples with a decline in its stock value, Nvidia is paving its way to greatness through the burgeoning artificial intelligence (AI) chip market. Third-party estimates indicate a significant annual growth rate of 38% in the AI chip industry, set to rake in $207 billion in annual revenue by the end of the decade. Riding on this wave, Nvidia reported a staggering 126% revenue boost to $60.9 billion in fiscal 2024, primarily propelled by the profitable AI data center graphics processing unit (GPU) market. Holding a dominant market share of 98%, Nvidia is reaping the rewards of its premium-priced AI GPUs, culminating in a noteworthy 288% surge in earnings per share to $12.96 during the same fiscal year.

Apple’s Stagnation in Mature Markets

Conversely, Apple finds itself entrenched in the saturated smartphone market, with the iPhone accounting for 58% of its total revenue in the first quarter of fiscal 2024. Despite pulling in $119.6 billion in revenue (a mere 2% year-over-year increase) during the quarter, Apple faces sluggish growth as the smartphone industry is projected to expand by a modest 2.8% in 2024. In contrast, tablet sales are waning while the PC sector anticipates a potential turnaround after consecutive years of decline.

Nvidia’s Dominance and Apple’s Market Share Woes

Noteworthy is the prevailing dominance of Nvidia in high-growth markets compared to Apple’s diminishing market share in its sectors. With Nvidia asserting itself as a frontrunner in AI chip development, Apple struggles to retain a significant hold in smartphones, sporting a market share of 20.1% in 2023, as opposed to Samsung’s 19.4%. In the PC realm, Apple lags as the fourth-largest vendor with a mere 8.5% share. The divergence in market dynamics accentuates Nvidia’s promising trajectory vis-à-vis Apple’s restrained growth.

Nvidia’s Bright Future and Apple’s Looming Shadow

Forecasts portray a stark contrast in the future profitability of Nvidia and Apple. Nvidia is projected to witness a robust 36% annual earnings growth over the next five years while Apple is slated for a meager 11% increment. The mounting expectation on Nvidia’s enviable prospects could translate into promising stock gains, a narrative that Apple, battling a lukewarm smartphone sector and potential AI lag, might struggle to emulate. Recent reports of Apple’s faltering iPhone sales in China further add to its woes, facilitating Huawei’s ascendancy and Samsung’s AI smartphone strides, placing Apple at a disadvantage in this evolving landscape. The absence of an AI-focused smartphone in Apple’s arsenal could compound its woes, allowing competitors to forge ahead in this AI-driven era.

Nvidia’s Ascent to Overtake Apple

As Nvidia forges ahead with its AI chip supremacy, Apple faces a mounting challenge of sustaining its market position. With Nvidia’s revenue poised to soar to nearly $131 billion by fiscal 2026, the company’s current valuation at 35 times sales signifies an upward trajectory propelled by unprecedented growth streaks. Nvidia’s promising market potential in AI chips affords the likelihood of enhanced sales multiples in the future, auguring well for its impending displacement of Apple from its market cap pedestal. The impending showdown between Nvidia and Apple beckons, with the former poised for a triumphant surge that could reshape the tech industry’s hierarchy.