*This* $5 Trillion Dollar AI Stock is about to 2x.
Overall Thesis
Apple stock is positioned to double due to upcoming server chip competition with Nvidia and the launch of the iPhone Duo, which addresses underperforming business segments.
Narratives
Kevin argues Apple is set to roughly double over the next few years, driven by two catalysts: a new high-margin data center/server business using Nvidia's NVLink Fusion networking to connect Apple's own chips, and the launch of the iPhone Duo which he believes will drive high-margin iPhone sales while cannibalizing the already-shrinking iPad segment. He believes current analyst growth estimates of about 9% are too conservative and that growth could exceed 20%, justifying a much higher valuation multiple.
Key Arguments
- Apple is in talks to enter the server market using its own chips plus Nvidia's NVLink Fusion networking technology, similar to how ASIC makers like Marvell and Qualcomm integrate with Nvidia's stack.
- Apple's Mac division margins and growth (28% growth, margins rising toward 50%) could make this a 'high margin Dell play,' referencing Dell's stock re-rating after margin expansion.
- The iPhone Duo is described as a 'game changer' for salespeople, parents, and professionals, offsetting the iPad's shrinking 6%/year segment with high-margin iPhone sales.
- At a 25% growth rate and expanded margins, Kevin models Apple justifying a ~26 P/E which could mean a ~$600 stock, roughly doubling from current levels within about three years.
Kevin remains bullish on Nvidia overall, viewing it as the dominant player controlling the entire data center stack, even as he discusses Apple potentially becoming a competitor/customer in servers. He sees Nvidia's mode as durable due to its full-stack control of switches, networking, and connections.
Key Arguments
- Nvidia is a manufacturer of the whole data center array top to bottom, which creates a huge moat.
- Nvidia sees Apple as a competitor for on-device AI and potentially in data centers, but Kevin still holds a bullish view on Nvidia itself.
- Nvidia's own product margins (~75%) are used as a benchmark against Apple's potential server margins.
Hedges & Caveats
- Prediction is speculative and based on product announcements and potential market opportunities
- iPhone Duo adoption rates are uncertain
- Competition with Nvidia in server chips is not guaranteed to succeed
- Healthcare and enterprise adoption timelines are unclear