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Apple Is Again the World's Biggest Company. Here's How It Can Keep Its Top Spot Over Microsoft and Nvidia.

Stephen Lam - Reuters / stock.adobe.com

It's not unusual in a horserace for a few horses to run neck and neck with each other before one takes the lead for good. This is happening in a different kind of race -- one among the world's largest companies.

Apple (NASDAQ: AAPL) forfeited its No. 1 spot, based on market cap, to Microsoft (NASDAQ: MSFT) earlier this year. The iPhone maker also briefly fell into third place this month as Nvidia (NASDAQ: NVDA) moved ahead.

However, Apple has now jumped past Nvidia and Microsoft to reclaim its top position. Can the tech giant keep the momentum going and cement its place at No. 1?

I think so. Here's exactly how Apple can retain its position over Microsoft and Nvidia as the world's biggest company.

Up the upgrades

Why did Apple lose its top spot in the first place? There are several reasons, but the company's sluggish growth ranks among the most important. Apple's revenue even fell 4% year over year in the second quarter of fiscal 2024, which ended on March 30, 2024.

Although Apple's services revenue continues to soar, iPhone sales still generate around 55% of the company's total revenue. Declining iPhone sales were the biggest cause of the overall Q2 revenue dip.

What happened to Apple's strong iPhone sales growth from previous years? Customers aren't upgrading like they used to. A Bloomberg Intelligence survey conducted earlier this year found that iPhone owners are holding onto their phones longer.

To hold on to its position as the world's biggest company, Apple primarily needs to do one thing: Get more customers to upgrade to newer iPhone models. Easy peasy, right?

A potentially good start

Apple just might have already found how to boost iPhone upgrades. It's not as easy as A-B-C but could be as easy as AI (artificial intelligence).

Apple unveiled its generative AI strategy (or at least part of it) at its Worldwide Developers Conference (WWDC) this week. Not everyone was overly impressed with the company's update. However, Apple did one key thing that could be pivotal: It ensured that the new AI functionality will only work on iPhone 15 Pro models and later.

Only around 10% of Apple's customers currently use the iPhone Pro and Pro Max models. Bank of America analyst Wamsi Mohan believes Apple Intelligence (Apple's name for its generative AI capabilities) could ignite a new upgrade cycle.

Apple won't introduce its new iPhone version (presumably called iPhone 16) until later this year. However, it's a pretty good bet this new phone will feature a next-generation chip that's significantly more powerful at AI processing. This could provide customers a further reason to swap their old iPhones for the newest model.

If Apple follows up in 2025 with even more impressive AI functionality, we could see an upgrade "super cycle" -- a surge in the adoption of new iPhones. That would tremendously help Apple secure its spot as the biggest company in the world.

What Apple can't control

So far, I've only discussed what Apple needs to do to hold on to the No. 1 position. However, some things Apple can't control could make this goal much harder to achieve.

For example, OpenAI could release the highly anticipated GPT-5 large language model (LLM). Assuming this LLM is as good as some expect and Microsoft integrates it throughout its products, Microsoft's market cap could remain larger than Apple's.

Nvidia launches its Blackwell GPU architecture later this year. The company has already revealed the demand for the forthcoming new platform is exceptionally high. Should Nvidia continue to trounce Wall Street's earnings estimates, its market cap could vault past Apple's and maybe Microsoft's, too.

We also can't rule out the possibility that other huge companies introduce game-changing technology that enables them to vie for the top spot. Both Alphabet and Amazon are within striking distance and could have aces up their sleeves.

Whatever happens, this horse race will be fun to watch. And for investors, it could provide multiple ways to profit in the coming years.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Bank of America, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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