Nvidia may leapfrog Apple in value if the iPhone maker doesn't wow investors with AI soon, analyst says

• Apple needs to release GenAI services soon — or risk Nvidia overtaking it in value, analyst says.
• The prediction comes as Apple suffers a decline in iPhone sales in China.
• Apple is shifting its focus further towards generative AI after killing its electric car project.

A lot is riding on Apple's push toward artificial intelligence — including the iPhone maker's current valuation dominance over Nvidia, the chip giant fueling the AI revolution, according to one analyst.

"If Apple fails to launch generative AI services this year that are better than market expectations, Nvidia's market value will most likely surpass Apple," Ming-Chi Kuo, a noted Apple analyst, wrote in a post on X, formerly known as Twitter. The post was translated from Chinese to English using Google.

The gap between Apple and Nvidia is already narrowing as investors flock to buy shares in the latter, which dominates the booming AI semiconductor market. Its stock has risen 260% in the last year, giving it a market cap of $2.06 trillion at Tuesday's close. Meantime, Apple gained only 13% to give it a valuation of $2.78 trillion.

One key reason Apple may need to ramp up its generative AI efforts is because of iPhone sales headwinds. It was expected to ship between 220 to 225 million units in 2024, according to Kuo; now, it may ship closer to 200 million by year-end, he said.

IPhone sales to China — a major market for the device — dropped by 24% within the first six weeks of 2024, according to a new report from Counterpoint Research, a market research firm. Vivo, a domestic tech giant, now tops the smartphone market in the country, followed by Huawei and Honor.

Apple appears to be buckling down on its AI strategy but is still seemingly playing catchup to the likes of OpenAI, Google, and Microsoft. Last week, Apple killed Project Titan, a multibillion-dollarlar, multi-year effort to create a self-driving electric car that could rival Tesla, according to Bloomberg. Leaders of the project reportedly said it nixed the car so employees on that team could instead work on generative AI.

But details of Apple's GenAI push are light so far. CEO Tim Cook hasn't made any official announcements yet, though it may be working on an AI coding assistant that would rival Microsoft's GitHub Copilot and may soon be released to developers for beta testing, Bloomberg reported.

Apple may also have plans to integrate AI features into software updates for its iPhone and iPad, as well as tools that could generate Apple Music playlists and slideshows, according to Bloomberg.

"I think there's a huge opportunity for Apple with GenAI," Cook said on the Q1 earnings call in February.

Apple and Kuo didn't respond immediately to a request for comment from Business Insiderent before publication.