Apple (AAPL) vs. NVIDIA (NVDA) - Assessing June AI Growth Potential

NASDAQ: AAPL | Apple Inc. News, Ratings, and Charts

AAPL – Despite facing tough competition, the tech hardware and chip industries show promise thanks to AI adoption, automation, and growing demand for smart products and services in today’s tech era. Let’s analyze Apple (AAPL) and NVIDIA (NVDA) to see which stock offers better AI growth potential in June. Keep reading…

The integration of AI into products, services, and business operations has revolutionized product development, optimized supply chains, and automated systems, enhancing consumer experiences. This widespread adoption has considerably improved efficiency and advanced data analytics, spurring innovation across tech, chip, and various other sectors.

The tech hardware market is highly competitive. However, with AI spreading across different industries, there’s a rising need for efficient and powerful hardware solutions. This demand is fueling significant growth in the sector this year. The IT hardware market is expected to grow at a 7.9% CAGR, reaching $191.03 billion by 2029.

Consequently, factors such as improved supply chains, increased disposable incomes, a growing preference for high-tech products, and consumers’ desire for smart AI-integrated electronics like smartphones and computers are contributing to the sector’s growth. The global AI hardware market is expected to hit $473.53 billion by 2033, showing a notable 24.3% CAGR from 2024 to 2033.

Meanwhile, increasing investments in advanced AI chip technologies and the growing use of robotics, especially in sectors like healthcare, retail, finance, and automotive, are driving demand for advanced AI applications and fostering innovation in the chip sector, leading to increased sales. Statista predicts, the AI chips market is projected to expand by 30% in 2024 and is expected to surpass $150 billion by 2030.

Given this backdrop, let’s compare two stocks, Apple Inc. (AAPL) and NVIDIA Corporation (NVDA), to understand why NVDA holds greater AI growth potential for investors this June.

The Case for Apple Inc. Stock

Apple Inc. (AAPL) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers the iPhone, the Mac, the iPad, and wearables, home, and accessories including AirPods, Apple TV, Apple Watch, Beats products, and HomePod.

AAPL’s stock has gained 15.1% over the past three months to close the last trading session at $194.55.

AAPL’s Tang Book Value grew at a CAGR of 2.4% over the past three years. Similarly, its levered FCF grew at a CAGR of 1.9% over the past three years.

In terms of forward EV/EBITDA, AAPL is trading at 22.18x, 49.5% higher than the industry average of 14.83x. Additionally, the stock’s forward EV/EBIT of 24.28x is 16.9% higher than the industry average of 20.77x.

In terms of the trailing-12-month Return on Common Equity, AAPL’s 147.25% is considerably higher than the 3.96% industry average. However, its trailing-12-month gross profit margin of 45.59% and Capex / Sales of 2.27% are 8.4% and 1.3% lower than the industry averages of 49.79% and 2.30%, respectively.

For the fiscal second quarter that ended March 30, 2024, AAPL’s total net sales decreased 4.3% over the prior-year quarter to $90.75 billion. Its operating income declined 1.5% from the year-ago value to $27.90 billion.

The company’s net income stood at $23.64 billion, down 2.2% year-over-year, and its EPS rose marginally year-over-year to $1.53. In addition, its Mac and Services sales grew 3.9% and 14.2% year-over-year to $7.45 billion and $23.87 billion, respectively.

Street expects AAPL’s EPS for the quarter ending June 30, 2024, to increase 4.9% year-over-year to $1.32. Its revenue for the same quarter is expected to grow 2.3% year-over-year to $83.67 billion. AAPL surpassed the Street EPS estimates in three of the trailing four quarters.

AAPL’s stock is trading above its 50-day and 200-day moving averages of $179.06 and $181.63, respectively.

AAPL’s POWR Ratings are consistent with this outlook. It has an overall rating of C, translating to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a C grade for Momentum, Stability, and Sentiment. Within the B-rated Technology – Hardware industry, AAPL is ranked #23 out of 38 stocks. To see the additional grades of AAPL for Growth, Value, and Quality, click here.

The Case for NVIDIA Corporation Stock

NVIDIA Corporation (NVDA) provides graphics, computing, and networking solutions internationally. It operates in three segments: Graphics, Compute & Networking. The company’s products are used in gaming, professional visualization, data center, and automotive markets.

NVDA’s stock has gained 209% over the year to close the last trading session at $1,209.98.

NVDA’s EBIT grew at a CAGR of 103.1% over the past three years. In addition, its EPS grew at a CAGR of 100.6% during the same period.

In terms of forward non-GAAP PEG, NVDA is trading at 1.41x, 29.5% lower than the industry average of 1.99x. However, its EV/EBIT is trading at 37.12x, 78.7% higher than the 20.77x industry average.

In terms of the trailing-12-month EBIT margin and net income margin, NVDA’s 59.85% and 53.40% are significantly higher than the industry averages of 4.66% and 2.62%, respectively. On the other hand, its 1.49% trailing-12-month Capex/Sales is 35% lower than the industry average of 2.30%.

NVDA’s revenue for the first quarter ended April 28, 2024, came in at $26.04 billion, up 262.1% year-over-year. However, its non-GAAP operating expenses rose 42.9% from the year-ago value to $2.50 billion. In addition, DELL’s non-GAAP net income and non-GAAP EPS grew 461.7% and 461.5% over the prior-year quarter to $15.24 billion and $6.12, respectively.

Analysts expect NVDA’s EPS and revenue for the quarter ending July 31, 2024, to increase 134.9% and 109.8% year-over-year to $6.34 and $28.33 billion, respectively. It surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.

NVDA’s stock is trading above its 50-day and 200-day moving averages of $931.56 and $654.24, respectively.

NVDA’s POWR Ratings reflect its bleak prospects. It has an overall rating of C, which translates to Neutral in our proprietary rating system.

It has a C grade for Momentum. Within the Semiconductor & Wireless Chip industry, it is ranked #23 out of 93 stocks. Beyond what we stated above, we also have given NVDA grades for Growth, Value, Stability, Sentiment, and Quality. Get all the NVDA ratings here.

AAPL vs. NVDA: Which stock offers AI growth potential in June?

Advancements in technology and the growing demand for personalized services will fuel long-term growth in the tech hardware and chip industries. The emergence of artificial intelligence aligns with the operational needs of both sectors, enhancing product offerings in tech and accelerating chip processing and automation to meet consumer demand.

Companies like AAPL and NVDA are poised to benefit from upcoming trends like generative AI, Quantum AI, IoT-AI convergence, conversational AI, and AI coding in the near future. Both AAPL and NVDA look well-positioned to capitalize on the industry’s promising prospects.

Considering the mixed prospects of AAPL and NVDA, it could be wise to keep an eye on them for June. However, NVDA seems like a better choice for AI growth due to its strong historical growth, positive momentum, robust profitability, and favorable analyst estimates compared to AAPL.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology – Hardware industry here. Also, click here, to check all the top-rated stocks in the Semiconductor & Wireless Chip industry.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

AAPL shares were trading at $195.94 per share on Friday afternoon, up $1.46 (+0.75%). Year-to-date, AAPL has gained 2.04%, versus a 12.82% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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