Apple had a market value of $3.7 trillion as of Dec. 31, making it the most valuable U.S. company, a title it has held for the better part of the last decade. But Apple has yet to demonstrate its ability to monetize artificial intelligence, at least not to the same degree as other big tech companies.
Not surprisingly, Wall Street expects Apple stock to trade sideways during the next year. In fact, the median 12-month target of $250 per share implies downside from its current share price of $251. It also gives Amazon(NASDAQ: AMZN) and Nvidia(NASDAQ: NVDA) a shot at surpassing Apple’s current valuation.
Amazon is currently worth $2.3 trillion. The stock price would need to reach $362 per share (about 65% upside as of Dec. 31) for its market value to reach $3.8 trillion.
Nvidia is currently worth $3.3 trillion. The stock price would need to reach $156 per share (about 16% upside as of Dec. 31) for its market value to reach $3.8 trillion.
Admittedly, the first prediction is much more aggressive than the second, and the one least likely to be correct. But I think both outcomes are plausible this year. Here’s why.
Amazon reported impressive financial results in the third quarter. Revenue increased 11% to $159 billion on especially strong sales growth in the advertising and cloud computing segments. Operating margin expanded more than 3 percentage points as the company made fulfillment more efficient, and GAAP earnings rose 52% to $1.43 per diluted share.
Looking ahead, the investment thesis is threefold: Amazon runs the largest e-commerce marketplace in North America and Western Europe, it is the third-largest ad tech company worldwide, and Amazon Web Services is the largest public cloud. That last point is especially important because it means Amazon is ideally positioned to benefit as demand for artificial intelligence (AI) draws more businesses to the cloud.
Wall Street estimates that Amazon’s earnings will increase 26% in the next 12 months. That consensus makes the current valuation of 47 times earnings look reasonable. Those figures give a price/earnings-to-growth (PEG) ratio of 1.9, which is a material discount to Apple’s PEG ratio of 3.6. If Amazon tops earnings estimates by even a small margin, its valuation multiple may expand to the point where its market value reaches $3.8 trillion.
Admittedly, the probability is slim that Amazon shares will advance 65% this year. Even so, patient investors should still consider purchasing a small position today. Indeed, only four companies in the S&P 500 index have a higher percentage of buy ratings than Amazon, according to FactSet Research.
Semiconductor company Nvidia reported solid financial results in the third quarter of fiscal 2025, which ended in October 2024. Revenue increased 94% to $35 billion on particularly strong sales growth in the data center segment, driven by demand for AI hardware and software. Meanwhile, non-GAAP net income increased 103% to $0.81 per diluted share.
Looking ahead, the bull case is straightforward: Nvidia graphics processing units (GPU) are the gold standard in accelerating computationally demanding data center workloads like artificial intelligence. Indeed, Forrester Research analysts recently wrote, “Nvidia sets the pace for AI infrastructure. Without Nvidia’s GPU, modern AI wouldn’t be possible.”
The company has an important catalyst on the horizon in the launch of its Blackwell GPU, which can complete AI training tasks up to four times faster and AI inference tasks up to 30 times faster than the previous Hopper architecture. Blackwell production ramped in the current quarter, so Nvidia should see substantial revenue from its next-generation chip in the coming year.
Wall Street estimates that Nvidia’s earnings will increase 50% in the next 12 months. That consensus estimate makes the current valuation of 51 times earnings look downright cheap. Nvidia stock could easily return 16% if the company reports earnings that align with expectations in the coming quarters, and shares could advance even more if it exceeds estimates.
Regardless, patient investors should feel comfortable buying a few shares today. In the previous section, I wrote that only four companies in the S&P 500 have a higher percentage of buy ratings than Amazon. Nvidia is in a similar position. Only six companies in the S&P 500 have a higher percentage of buy ratings than Nvidia, according to FactSet Research.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, FactSet Research Systems, and Nvidia. The Motley Fool has a disclosure policy.
