Could Apple’s First Touchscreen MacBook Pro, First Foldable iPhone Duo Phone, and HomeView Pole Vault Apple Beyond Nvidia to Become the First Company in the $10 Trillion Club?

The artificial intelligence (AI) boom has crowned a new kind of technology king. Instead of a company directly serving individuals with products or software, this market cap leader gained momentum through its AI chip expertise. I’m talking about Nvidia (NVDA -0.80%), which last year became the first company to reach a $5 trillion market capitalization. But the situation has shifted lately. Worries about AI financing have weighed on Nvidia and other tech players that are heavily involved in the space, while Apple (AAPL +1.48%) has pushed to record highs.

Apple even passed Nvidia during a recent trading session to become the world’s most valuable company, though Nvidia took back the top spot by the close. This rally has come from the consumer side of tech rather than the AI infrastructure trade, and new devices are fueling it.

The pace has picked up, with Apple recently unveiling three: its first foldable iPhone, the iPhone Duo; HomeView, a smart home display; and Apple’s first touchscreen MacBook Pro. Could these products help Apple pole vault past Nvidia and become the first company in the $10 trillion club? Let’s find out.

Image source: Getty Images.

Apple’s path to $5 trillion

First, a quick look at Apple’s market value path so far. This consumer goods and tech giant was the first to reach a $1 trillion market value in 2018, and it has kept climbing as the iPhone anchors a vast ecosystem of devices and services that are driving growth. Last year, Apple generated about $416 billion in revenue, with the iPhone bringing in nearly half of that. Services contributed $109 billion, showing that these devices are driving recurrent revenue as users sign up for things like digital entertainment or storage.

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Momentum has continued this year, with revenue in the fiscal third quarter climbing 16% and earnings per share topping analysts’ estimates. Between Oct. 6 and Oct. 23, Apple’s market value rose about 4%, while Nvidia’s fell nearly 12%.

NVDA Market Cap data by YCharts

Now, on to the new products. Apple recently launched the iPhone Duo, and though the company is late to the foldable space, IDC expects it to capture 44% of the market by value this year.

Apple, after long resisting a foray into touchscreen, recently took the leap with the new MacBook Pro with PROLED XDR Display. Meanwhile, HomeView, a smart speaker with a display that uses a redesigned Siri, is Apple’s attempt to challenge Amazon in the smart home.

Is $10 trillion realistic?

Now, here’s the challenge. To reach $10 trillion, Apple’s value would need to climb nearly 100% from today’s level of about $5.1 trillion. While Apple’s recent products are exciting, they’re small when compared to the company’s complete portfolio. It may take time for each one to contribute meaningfully to revenue. A bright spot is that Apple’s new chief executive officer, John Ternus, has a long history of product development — he used to be Apple’s senior vice president of hardware engineering — so we could see a strong focus on products in the quarters to come.

To reach $10 trillion, valuation matters, too. Apple trades at about 37 times forward earnings, though analysts expect about 8% earnings growth next year. All of this means Apple isn’t exactly dirt cheap in relation to expected earnings.

So, could Apple become the first $10 trillion company? Maybe someday. But it would take a few years and substantial earnings growth — not just a few new products. Nvidia, with AI demand still strong, might be just as likely to get there first. Apple is a high-quality business with a powerful ecosystem, and these launches show it can still innovate. But after its run to record highs, I see $10 trillion as a long-term possibility rather than a near-term bet. Investors may want to buy for the long haul and consider adding on dips.

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.