It wasn’t too long ago that Apple (NASDAQ:AAPL) was the largest company in the world by market cap. It was the very first firm to crack the $1 trillion market cap milestone. And though the iPhone maker has slipped in the standing by one spots from the top, making it the second-largest firm at the time of writing, I wouldn’t be so quick to count the firm out as it looks to pull forward the next device refresh cycle with artificial intelligence (AI).
Undoubtedly, AI is basically a nitrous booster for the mega-cap tech titans looking to pull ahead in the so-called AI race. It’s still early days, which makes it way too early to call a winner. Still, firms that are able to get their AI boosters firing on all cylinders can pull ahead in the market cap standings.
With Nvidia (NASDAQ:NVDA) having briefly taken the silver medal from AAPL and even eyeing the top spot and title for the world’s largest company, here are three stocks I’d buy as the race for the top three gets interesting.
Nvidia (NVDA)
It’s still early in the AI race, but if I had to place a bet on one firm to win the race, it would have to be Nvidia. The stock has already taken off, surging above the wildest dreams of many investors who bought a few years ago. Post-split, the stock trades at $121 and change per share, making it far more palatable for self-guided retail investors who don’t have more than $1,000 to drop on a single share.
Unsurprisingly, NVDA stock crept 0.75% higher on Monday, its big split day. Now that shares are more accessible, I think it could have more room to run despite AAPL bypassing its market cap again on Tuesday. Nvidia has got the AI accelerators to beat. And when rivals catch up with AI chips that can rival Nvidia’s best, Nvidia will already be a step (or maybe two) ahead in the game.
In many ways, trying to catch Nvidia can be like chasing a cheetah.
Apart from Nvidia’s GPU dominance, the firm has a language model in the works as well as an ecosystem of tools, like Nsight Systems and CUDA toolkit, to help build future apps in corners of AI and the Omniverse. If you seek wide moats and powerful growth, seek an ecosystem. Of all the firms today, it’s looking tough to top Nvidia’s ecosystem in the works.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is in the top spot for largest company, but probably not for very long, with Nvidia at its tail. Pending a substantial “tech wreck” sell-off centered around overheated AI stocks, I see Microsoft as destined to fall to the second spot in the market-cap race, at least over the near term, as investors continue piling into NVDA stock at an alarming pace.
Over the medium- to long-term, however, MSFT stock has all the drivers it needs to be the biggest and best firm on Earth. Microsoft’s AI advantage is already well-known by investors, and its stake in OpenAI will be virtually impossible to rival if it’s Sam Altman who has the keys to the holy grail of AI: AGI or artificial general intelligence.
Indeed, Sam Altman’s closeness with Microsft’s management, I believe, is an overlooked advantage that the $3.1 trillion behemoth has in the AI race. We got a glimpse of it when Microsoft CEO Satya Nadella was quick to offer Sam Altman a job when he was briefly and temporarily shown to the door by an OpenAI board that’s since been shaken up.
Microsoft may have skin in the game, but OpenAI remains its own entity, especially with its recent partnership with long-time Microsoft rival Apple, a collaboration that may have Nadella sweating. On one hand, an OpenAI-Apple deal may pose a threat to Microsoft. On the other, it may stand to take some regulatory scrutiny off Microsoft’s back.
Either way, it’s clear Microsoft has a gem in OpenAI, or at least almost half of one, with its 49% stake.
Apple (AAPL)
Finally, we have Apple, which has been faltering in the market cap race lately. Regulator pressures in the U.S. and Europe are one notable headwind that’s not to be taken lightly. Less excitement about generative AI may be another sore spot. For others inclined to be backward-looking, perhaps it’s the weak iPhone sales (especially in China) that are the reason to pass on AAPL stock after its latest worldwide developers conference (WWDC).
Like the other two titans in this piece, Apple has intelligence. It’s called Apple Intelligence, which sounds like the company is taking ownership and accountability of its AI offering. That’s big in the age of AI hallucinations and unknowns surrounding what firms and cloud service providers are actually doing with our data that’s sent over to AI-accelerated servers at the local data center.
Either way, Apple is not a company I would sell after recently failing to break new highs on the back of its WWDC 2024 presentation. AI and Vision Pro, Apple’s mixed-reality device, hold tremendous long-term potential in the face of relatively muted expectations.
On the date of publication, Joey Frenette held shares in Apple and Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.