I remember the first time I saw Usain Bolt run. I don’t know if it was the Olympics or some other event. I couldn’t tell you whether it was a 100-meter or 200-meter race.
What I do remember is sitting there with my jaw dropped, thinking “A person is not supposed to be able to do that.”
This still from a 200-meter race in 2009 sums it up:
Those are all world-class sprinters. Usain Bolt destroyed them. It shouldn’t even be possible to be that much better, but there you go.
Performance like that is something that shouldn’t be possible, it’s the only parallel I could come up with for what Nvidia (NASDAQ: NVDA) has done over the last couple of years – it shouldn’t be possible…
I know that kind of hyperbole sounds like a reach. Plenty of companies have grown at breakneck pace before, right?
Actually no. Not like Nvidia.
In 2022, Nvidia posted $26 billion in revenue. Last year, revenue more than doubled, to $60 billion. When 2024 draws to a close, Nvidia will have doubled revenue again – to $120 billion. For 2025, estimates for revenue are as high as $205 billion.
There’s only been one company in history that’s managed to post revenue growth of +$50 billion from one year to the next – Apple (NASDAQ: AAPL). In fact, from 2020 to 2021, Apple grew revenue by $90 billion – from $274 billion to $365 billion.
Little wonder that Apple and Nvidia are both vying to be the most valuable company on the S&P 500…
Sell Nvidia?
Bank of America says Nvidia is “…still only in the second year of what could be a three- to five-year deployment cycle, representing around $300 billion in long-term opportunity.”
BofA sees the stock topping out at $150.
But then what? What happens when we get to the end of the “three- to five-year deployment cycle?”
The problem for Nvidia is the same as it is for a world-class sprinter. Both eventually slow down. Eventually, the massive spending to build new data centers and upgrade existing ones will be mostly done.
It’s worth considering what will happen to Nvidia’s stock price between now and the point where its growth starts to slow. Bank of America says there is still a $300 billion opportunity for Nvidia. Revenue could double again. And Nvidia’s profit margins are better than 50%…
Nvidia currently has $20 billion in net cash. It’s not unreasonable to think the company could have $60 or $70 billion in cash this time next year. Then what? Maybe Nvidia will start paying a massive dividend? Maybe they make a splashy acquisition or two?
There are a lot of “what ifs” for Nvidia. Many of them are positive.
But from a long-term investment point of view, I like the fact that there aren’t many “what ifs” for Apple.
Apple vs. Nvidia
You may notice that Nvidia had a pretty good day today, rising by 6% or so. Meanwhile, Apple was hard-pressed to gain 1%. Nvidia might be the better stock to trade if your looking to make some quick profits.
Still, there’s a pretty solid case to be made that Apple will perform better than Nvidia over the next 12 months.
For one, Apple could be on the cusp of a hugely profitable upgrade cycle when it releases its new line of iPhones, probably this Fall.
Plus, Apple’s cash flow already dwarfs Nvidia’s. And Apple’s a consumer-facing business, which means revenue from newer-better-faster phones should be steadier than Nvidia’s reliance on other companies’ CAPEX spending.
And then there’s data. Data has become a significant input for AI companies. Apple’s reach into all aspects of its customers’ activity is a treasure trove.
Nvidia doesn’t report earnings again until late August. You can bet that investors will start asking “Can they do it again?” “Is this the quarter that growth slows?”
In fact, I expect growth anxiety will increase ahead of each quarterly earnings report until Nvidia actually does disappoint. If you’re ok with that, fine by me. If you’d rather skip the worry, Apple is the way to go…
Godspeed,
Briton Ryle
Chief Investment Strategist
Outsider Club
X/Twitter: https://twitter.com/BritonRyle
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