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Will NVIDIA Pass Microsoft to Become the World’s Most Valuable Company?

Eric Bleeker

Published: June 1, 2024 2:52 pm

Is NVIDIA (NASDAQ: NVDA) going to surpass every other company to become the world’s most valuable stock? NVIDIA is now the third most valuable company in the world, trailing only Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL). We analyze the numbers at what share price NVIDIA could pass these companies and explore how the company was able to reach these heights.

Can NVIDIA Pass Microsoft?

Highlights of this discussion between 24/7 Wall Street analysts Austin Smith and Eric Bleeker are below.

• The battle for the world’s most valuable company has been going on between Apple and Microsoft in recent years, but there’s suddenly a new company entering the fray. 
• As of May 30th, the battle for the world’s most valuable company stood at: 
  • Microsoft: $3.11 Trillion 
  • Apple: $2.95 Trillion 
  • NVDA: $2.81 Trillion 
• This means at about $1,200 per share NVIDIA would pass Apple. 
• At about $1,250 would pass Microsoft at its share price today. 
• How do the companies compare when looking at their actual profitability?
  • NVIDIA: Projected earnings next year of $83 billion 
  • Microsoft: $99 billion 
  • Apple: $107 billion 
• This makes NVIDIA the most “expensive” if it passes both companies, but not by as much as many investors may think. 
• Since the market is forward-looking, we can also look at the current profit levels Wall Street is projecting in 2028. When looking at earnings estimate for this year, here’s how all three companies compare:  
  • Apple: $145 Billion 
  • Microsoft: $151 Billion 
  • NVIDIA: $126 Billion 
• Given NVIDIA’s meteoric rise, it might surprise you that Wall Street doesn’t have NVIDIA closing the profitability gap in the near future! 
• So will NVIDIA surpass Microsoft to become the world’s most valuable company: Our expectation is that it will. 
• The reason is that demand for NVIDIA’s Blackwell chips looks so strong the company is likely to continue posting sequential gains through at least mid-2025 and growth rates for next year keep rising. 
• NVIDIA still presents the most upside of the three. A key reason for that is no one truly knows where AI demand could peak.
• There are upside scenarios for NVIDIA that simply are beyond what any company on Earth has seen before. For example, there’s some possibility of advancements in AI bringing AGI (artificial general intelligence) to reality in the next 5 years. That would give NVIDIA market power unlike anything we’ve ever seen, and no one has a great idea of how likely it is. This possibility of still massive upside ahead makes it unlikely NVIDIA will trade for cheaper multiples than its big tech peers across the next 12 months.
• But, the other side to NVIDIA’s rise is the downside is greater than either Apple or Microsoft. For example, we’ve seen what happens to Apple when there’s a slowdown in smartphones, the company is in one right now! And the downside is fairly limited. Apple has a market position where barring some unforeseen event like a major war – it’s hard to imagine it being a stock with a drawdown higher than 30% in the coming years. Yet, it’s uncharted territory how much NVIDIA could fall if orders for AI chips suddenly fell below expectations. A look back at NVIDIA’s stock chart shows that while the stock has produced fabulous growth, booms and busts in past growth markets like video games and cryptocurrencies have been very volatile. 
• Yet, the bottom line is that no tech company feels like they can get left behind in AI today. More to the point – the return from big cloud companies like Microsoft that are most aggressively buying up NVIDIA’s chips is still very positive – and NVIDIA’s Blackwell offers a meaningful upgrade to drive demand the next year. So a slowdown in GPU chips across the next year appears unlikely. 
• So it wouldn’t surprise us to see NVIDIA not only surpass Microsoft – but also become the world’s first $4 trillion company before the year is over. 

Transcript:

All right, Eric, I love looking back through history and seeing the Earth’s most valuable company in any given year.

It’s really telling and it’s really fun.

You get to see what was the biggest company on Earth in 1975 and 1983 and 1994.

And now Earth’s most valuable company is Microsoft.

But with this surge that NVIDIA is seeing, I mean, adding half a billion dollars in market cap overnight, I gotta ask is NVIDIA going to pass Microsoft to become Earth’s most valuable company?

They certainly have the wind at their backs.

It feels like this company can do no wrong.

And as we’ve talked about, although there’s certainly a lot of enthusiasm about NVIDIA, the valuation kind of backs it up.

It doesn’t look like they’re getting out over their skis here.

This company actually on a relative basis has become cheaper into this rally.

And we’re talking about, you know, a price-to-earnings multiple or price-to-forward earnings multiple.

So it’s tempting to call this a bubble simply because of how much it’s grown, but the fundamentals really do seem to back it up.

We’re seeing companies from Amazon saying they simply cannot get their hands on enough chips.

There’s a multi-year demand.

If NVIDIA could fulfill all their demand today, they would still need more chips for the next two and three years.

So we’re seeing fundamentals back this up.

Let’s put the bubble conversation off to the side.

Will NVIDIA pass Microsoft to become Earth’s most valuable company?

Let’s talk about it.

Yeah, you know, Austin, as you noted, we’re stock market junkies.

We love this stuff.

It’s like a sports fan looking at the standings, right?

What companies, you know, what teams in first place, right?

We want to know which stocks are in first place.

And recently, this has been a two-way battle between Microsoft and Apple, and that’s been going on for years.

But again, there’s suddenly a new competitor entering the arena.

And as of May 30th, Microsoft’s market cap is 3.11 trillion.

Apple is 2.95 trillion and NVIDIA is 2.81 trillion.

So this is getting pretty close.

And if we’re talking about share price numbers, NVIDIA is going to split their stock.

So eventually these numbers will not be valid.

But as of today, at about $1,200 per share, NVIDIA would pass Apple.

At about $1,250 per share, it would pass Microsoft.

So one question, as you noted earlier, is, is NVIDIA passing them purely on hype or are there numbers to back this up?

Well, if we look at projected earnings next year, NVIDIA’s at 83 billion in projected profits.

Microsoft’s at 99 billion and Apple’s at 107 billion, which makes NVIDIA the most expensive stock in this group if it passes both companies, but not as much as you might think from reading media headlines.

And we can look for the very far future out because again, the stock market is forward-looking.

So we can look at 2026 estimated profits and we have Apple at 145 billion, Microsoft at 151 billion, NVIDIA at 126 billion, which might surprise you that Wall Street actually doesn’t see NVIDIA closing the gap in that period.

Now, at the end of the day, will NVIDIA pass Microsoft to become the world’s most valuable company?

My answer is yes, I believe that will happen.

And the reason is that demand for the company’s next-generation Blackwell chips looks so strong and the company seems likely to continue posting sequential gains quarter over quarter through.

It’s looking to go at least through mid-2025.

NVIDIA still presents the most upside of the three.

Part of that is no one truly knows where AI demand will peak.

And the other aspect of AI is there’s some possibility of something like AGI or artificial intelligence that is as intelligent as a human that would give NVIDIA market power like we’ve never seen and no one knows how likely it is.

So they’re always going to have that potential for the really insane upside expectations.

But Austin, I do wanna say the other side to this.

We don’t know what happens to NVIDIA stock if there is a slowdown in GPUs, and the odds are it’s going to be probably pretty painful.

We’re looking at what happens to a slowdown with Apple right now.

They’re reporting negative year-over-year sales growth, and the company still has pretty limited downside, still performing pretty well in spite of that environment.

So again, barring some kind of unforeseen event like a massive war or something like that, it’s just hard to imagine an Apple dropping 30%.

But it’s very easy to imagine that scenario playing out for NVIDIA if its growth unexpectedly slowed.

But for now, no tech company feels like they can get left behind in the race for AI.

And more to the point, the return from big cloud companies like Microsoft, and also Amazon, they’re most aggressively buying up NVIDIA’s chips.

The return seems to be pretty good.

And Blackwell, which is the next-generation chip, offers a meaningful reason to continue buying more chips because it’s that much of an upgrade.

So here’s what I want to say, Austin.

It wouldn’t surprise me to just see NVIDIA not only surpass Microsoft.

It wouldn’t surprise me if they became the world’s first $4 trillion company before the year is over with.

I think they have that much momentum behind the stock right now.