March 8 was a rollercoaster day in the stock market, with Nvidia (NASDAQ: NVDA) making headlines as its shares surged to an all-time high of $974, only to plummet over 10% and end the day at $875.28. At its peak, Nvidia was within striking distance of surpassing Apple (NASDAQ: AAPL) in market cap, but by the close of trading, it was over 20% away.
Despite the wild swings, many analysts believe that Nvidia could potentially overtake Apple to become the second most valuable “Magnificent Seven” stock, behind Microsoft. The reason for this optimism lies in Nvidia’s strong earnings performance and growth trajectory.
Unlike some other high-flying growth stocks, Nvidia’s rally is not solely based on optimism and speculation. The company has been delivering impressive sales and earnings growth, coupled with margin expansion. Analysts expect Nvidia’s earnings per share to more than double from fiscal 2024 to fiscal 2025, which could justify a higher valuation for the company.
However, Nvidia’s valuation is a point of concern for some investors, with its price-to-earnings ratio currently sitting at 73.6 based on trailing 12-month earnings. While this may seem high, the forward P/E based on expected earnings for fiscal 2025 is more reasonable at 35.7.
The key to Nvidia surpassing Apple in market cap lies in the company’s ability to meet or exceed earnings expectations. If Nvidia continues to deliver strong earnings growth, supported by its leadership in the artificial intelligence (AI) space, the stock could see further upside.
On the other hand, Apple, despite facing some challenges and negative market sentiment, is seen as a better long-term investment by many analysts. The company’s brand, market position, and financial health give it a solid foundation for growth and innovation.
While Nvidia may offer higher potential returns in the short term, Apple is viewed as a safer and more stable investment over the long term. Investors who are confident in Nvidia’s growth prospects may see value in the stock, but those looking for a more conservative option may prefer Apple.
In the end, both Nvidia and Apple have their strengths and weaknesses, and investors should carefully consider their risk tolerance and investment goals before making a decision. The stock market is always unpredictable, but with careful research and analysis, investors can make informed choices that align with their financial objectives.
