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ASX mining shares including Core Lithium Ltd (ASX: CXO) and Iluka Resources Limited (ASX: ILU) are featured in the Federal Government’s Australian Critical Minerals Prospectus released this week.

The prospectus showcases 52 high-quality, investment-ready critical minerals projects that the government hopes will attract further local and international investment.

Let’s check out which ASX mining shares have projects being spruiked by the government.

5 ASX mining shares with projects in the prospectus

The prospectus forms part of the Critical Minerals Strategy 2023-2030.

The strategy aims to make Australia a globally significant producer of raw and processed critical minerals.

The purpose of the prospectus is to attract investment from local and global investors to help Australia develop new mines and build the new industries it needs to become a renewable energy superpower.

Here are five ASX mining shares featured in the prospectus:

Core Lithium Ltd (ASX: CXO)

Core Lithium is Australia’s newest lithium producer. The government is spruiking its BP33 underground mine, which is currently the subject of an updated Feasibility Study ahead of a final investment decision (FID) due in the first quarter of 2024.

The Core Lithium share price is 19 cents, down 1.54% today and down 83.3% over the past 12 months.

Liontown Resources Ltd (ASX: LTR)

In the prospectus, the government tells investors that Liontown’s Kathleen Valley hard-rock lithium project is world-class in scale and economics, with first production due in mid-2024. The government tells investors that Liontown will deliver US Inflation Reduction Act-compliant material to Tier 1 customers.

According to the prospectus:

Liontown is progressing studies into downstream processing options to convert spodumene concentrate into higher grade outputs. The Company is ideally positioned to be a fully integrated lithium producer to capture long-term value from mine to end-use in the EV market.

The ASX lithium mining share is currently fetching 98 cents. It’s down 1.01% today and down 37.8% over the past 12 months.

Iluka Resources Limited (ASX: ILU)

The government is seeking funding to help Iluka build the Eneabba Refinery, Australia’s first fully integrated rare earths refinery. It is due for commissioning in late 2025.

Also featured was Iluka’s high-grade Balranald critical minerals deposit. It contains significant amounts of rutile, zircon, and other rare earths. Iluka began construction in August and expects this to take 18 months. Commissioning is currently scheduled for Q1 2025.

The ASX mining share is currently worth $7.20, up 1.7% today and down 36.1% over the past 12 months.

Neometals Ltd (ASX: NMT)

Neometals owns one of the world’s largest and highest-grade hard-rock titanium and vanadium deposits.

The government says the company is open to discussions regarding project equity ownership, joint venturing, project financing and offtake for the Barrambie project. With a significant Mineral Resource Estimate and Ore Reserve, and a pre-feasibility study completed last May, the project is mine-ready.

The Neometals share price is 14 cents, down 2.14% today and down 83.5% over the past 12 months.

Renascor Resources Ltd (ASX: RNU)

The government is seeking backing for Renascor’s vertically integrated processed graphite operation in South Australia. It will process graphite concentrate from the company’s Siviour mine and concentrator on the Eyre Peninsula and a battery anode material (BAM) processing facility in Bolivar.

Renascor completed the BAM Feasibility Study last year.

This ASX mining share is changing hands for 7.9 cents, up 1.3% today. It has fallen 70.7% over the past 12 months.

Updates to the Critical Minerals List

In addition to seeking private investment through the prospectus, the government has also committed $4 billion in funding for critical minerals supply chain businesses through its Critical Minerals Facility.

In December, the government also updated its Critical Minerals List. The list highlights urgently required minerals that are essential for modern green technologies, economies and security.

The government considers them crucial to our own transition to net-zero emissions. They are also important for the development of our advanced manufacturing industry.

In the recent update, the government added fluorine, molybdenum, arsenic, selenium, and tellurium to the list and removed helium.

The government has also introduced a Strategic Minerals List.

This list comprises six minerals considered important for the global energy transition but which are not currently in short supply. They are copper, nickel, aluminium, phosphorous, tin, and zinc.

Minister for Trade and Tourism, Don Farrell said:

Australia is on the cusp of a golden age in critical minerals development.

This Prospectus showcases many game-changing Australian critical minerals opportunities for international investors. We have an abundance of minerals with a strong regulatory environment, and a range of free trade agreements with countries in need of our resources.

The post 5 ASX mining shares with projects being spruiked by the Australian Federal Government appeared first on The Motley Fool Australia.

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More reading

• Have Core Lithium shares finally reached a bottom now?
• Where will the bottom be for the scorched lithium price?
• Uh oh! Does this spell more bad news for ASX 200 lithium shares?
• Liontown share price slips as plunging lithium price outweighs pending maiden production
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Bronwyn Allen has positions in Core Lithium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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You’ve likely noticed that ASX uranium stocks are getting a lot of attention of late.

And for good reason.

Uranium shares have been booming over the past year amid soaring uranium prices.

Yellowcake is now trading for around US$106 per pound. That’s more than double the roughly US$50 that same pound was worth a year ago.

The huge price spike comes as an ever-growing number of nations are building, or planning to build, new nuclear power plants to provide reliable, emissions-free baseload power. At the recent United Nations Cop28 climate conference in Dubai, 22 nations pledged to triple their nuclear power capacity.

That’s seeing demand surge faster than producers can increase their supplies.

Today ASX uranium stocks are getting another big boost following an overnight update from Kazakhstan-based Kazatomprom.

The world’s top uranium producer reiterated concerns that supply issues with sulphuric acid, crucial for its ISR uranium mining method, will impact its production levels in 2024.

With that said…

Why this ASX uranium stock tops my list

While there are a number of quality miners to choose from, S&P/ASX 200 Index (ASX: XJO) uranium stock Boss Energy Ltd (ASX: BOE) tops my list of ASX uranium stocks to cash in on the ongoing production woes.

Boss Energy, with a market cap of $2.5 billion, is primarily focused on its Honeymoon Uranium Project, located in South Australia.

As you can see in the above chart, the Boss Energy share price has rocketed 128% over the past 12 months. And shares are already up 40% in 2024.

That massive growth saw the ASX uranium stock added to the ASX 200 as part of the December 2023 quarterly rebalance. This should offer some added support, opening the door to more fund managers, often limited to the larger end of the market, to invest in Boss.

It was also pleasing to see Boss commence its first mining activities at Honeymoon in October.

And the ASX uranium stock is set to become a multi-mine uranium producer after acquiring 30% of the Alta Mesa Project in the United States earlier in December.

“This project has many key similarities to Honeymoon and will enable us to diversify our production base on both a project and geographical basis while driving growth in our production and cashflow,” Boss Energy managing director Duncan Craib said of the acquisition.

The past quarter also saw Boss enter into its first binding sales agreement with a major publicly listed US power utility. The agreement will see the company sell 1 million pounds of uranium from Honeymoon over a seven-year period. That’s set to commence in 2025, with uranium to be sold at market-related prices.

Boss Energy’s balance sheet is also quite strong.

As at 31 December, the ASX 200 uranium stock had no debt, cash of $227 million and a uranium stockpile valued at $202 million.

The post My top ASX uranium stock pick to cash in on production woes appeared first on The Motley Fool Australia.

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More reading

• Why are these 5 ASX uranium shares racing higher again today?
• How ASX shares vs. property performed in January
• These were the best performers on the ASX 200 in January
• If you’d put $40,000 in this ASX uranium stock 5 years ago, you’d have $600,000 now
• Why Boss Energy, Calix, Frontier Digital, and Gold Road shares are falling today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a high. At the time of writing, the benchmark index is up 1.4% to 7,694.6 points.

Four ASX shares that have failed to follow the market’s lead are listed below. Here’s why they are falling:

AGL Energy Limited (ASX: AGL)

The AGL share price is down 3.5% to $8.23. This appears to have been driven by a broker note out of Macquarie today. Its analysts have downgraded the energy giant’s shares to a neutral rating with a reduced price target of $9.30. The broker believes that AGL’s earnings will fall through to FY 2026 unless electricity prices return to long-term averages. In addition, it notes that the anticipated surge in summer usage is not emerging.

Arcadium Lithium (ASX: LTM)

The Arcadium Lithium share price is down 3.5% to $7.26. This follows a poor night of trade for the lithium miner’s shares on Wall Street on Thursday. This latest gain means that the company’s shares have lost a third of their value since the start of 2024.

Chalice Mining Ltd (ASX: CHN)

The Chalice Mining share price is down 7.5% to a new 52-week low of 94.2 cents. This morning the mineral exploration company announced that its non-executive director, Morgan Ball, has announced his intention to resign. Mr Ball is Chalice’s longest serving non-executive director. He is resigning from the company to dedicate more time to his other roles.

Nickel Industries Ltd (ASX: NIC)

The Nickel Industries share price is down 2.5% to 76.2 cents. This has been driven by the nickel producer’s shares going ex-dividend for its unfranked final dividend of 2.5 cents per share. This will be paid to eligible shareholders later this month on 19 February.

The post Why AGL, Arcadium Lithium, Chalice Mining, and Nickel Industries shares are falling appeared first on The Motley Fool Australia.

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More reading

• Is the AGL share price a buy before its half-year results drop?
• 3 ASX All Ords shares with ex-dividend dates in the next week
• Here are the top 10 ASX 200 shares today
• This ASX 200 stock has rocketed 42% in six days. Here’s why
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is back on form and charging higher on Friday. In afternoon trade, the benchmark index is up 1.1% to 7,671.4 points.

Four ASX shares that are rising more than most today are listed below. Here’s why they are jumping.

Capricorn Metals Ltd (ASX: CMM)

The Capricorn Metals share price is up 4% to $4.69. This follows a strong session for gold miners and the release of a bullish broker note out of Bell Potter. In respect to the latter, its analysts have retained their buy rating and lifted their price target on the gold miner’s shares to $5.95.

Deep Yellow Limited (ASX: DYL)

The Deep Yellow share price is up 15% to $1.72. Investors have been buying Deep Yellow and other ASX uranium shares today after the world’s largest uranium miner, Kazatomprom, warned that its 2025 production could fall short of guidance. Kazatomprom’s production plans are likely to be impacted by construction delays and sulphuric acid shortages. The latter is used for extracting the chemical element.

Pinnacle Investment Management Group Ltd (ASX: PNI)

The Pinnacle share price is up 9% to $10.90. This has been driven by the release of the investment management company’s half year results. Pinnacle posted a net profit after tax of $30.2 million. This was down slightly from $30.5 million during the prior corresponding period. A fully franked interim dividend of 15.6 cents per share was declared. That’s in line with last year’s interim dividend.

Playside Studios Ltd (ASX: PLY)

The Playside share price is up 7% to 83.5 cents. This morning, this high-flying games developer announced that Fumi Games’ Mouse is the latest title to be signed to its publishing division. The company nots that the official gameplay trailer was released in December and has received 20 million total views across tier one gaming news channels and social media. It is due to be released in 2025.

The post Why Capricorn Metals, Deep Yellow, Pinnacle, and Playside shares are jumping today appeared first on The Motley Fool Australia.

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More reading

• Why are these 5 ASX uranium shares racing higher again today?
• Guess which ASX 200 gold share Bell Potter says is a buy with almost 30% upside
• Up 18% today. Is it too late to buy Deep Yellow shares?
• Pinnacle share price leaps 9% as funds swell above $100 billion
• Brokers name 3 ASX shares to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Deep Yellow Limited (ASX: DYL) shares are catching the eye on Friday.

At the time of writing, the uranium developer’s shares are up 18% to $1.76.

This latest gain means that its shares are at a 52-week high and up almost 120% over the last 12 months.

What’s going on with Deep Yellow shares?

Investors have been buying Deep Yellow and other ASX uranium shares today amid concerns over the supply of the chemical element.

This follows news that the world’s largest producer of uranium, Kazatomprom, has warned that its 2025 production plans are likely to be impacted by construction delays and sulphuric acid shortages. The latter is used for extracting the uranium. It said:

If the limited access to sulphuric acid continues throughout the current year and the Company does not succeed in reducing the delay in the construction schedule at the newly developed deposits in 2024, this could unfavourably influence Kazatomprom’s production plans for 2025.

Given how demand is already tipped to outstrip supply, this has many believing that uranium prices are going to remain at sky high levels for some time to come.

This will be good news for Deep Yellow and other uranium players.

Is it too late to invest?

Bell Potter is a fan of the company and currently has a buy rating on its shares.

However, its price target of $1.81 is only a fraction ahead of where Deep Yellow shares trade today.

Though, it is worth noting that this recommendation was made before today’s Kazatomprom news. So, it is possible that Bell Potter could boost its valuation in the coming days to reflect the development.

Stay tuned for that.

The post Up 18% today. Is it too late to buy Deep Yellow shares? appeared first on The Motley Fool Australia.

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• These are the 10 most shorted ASX shares
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pinnacle Investment Management Group Ltd (ASX: PNI) share price is charging higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) financial services company closed yesterday trading for $9.98. At the time of writing on Friday morning, shares are changing hands for $10.87, up 8.9%

For some context, the ASX 200 is up 0.8% at this same time.

The Pinnacle share price is racing ahead of the ASX 200 following the release of the company’s half-year results for the six months ended 31 December (1H FY2024).

Read on for the highlights.

What’s piquing ASX 200 investor interest?

ASX 200 investors are bidding up the Pinnacle share price today after the company reported strong growth in its funds under management (FUM).

Pinnacle announced that its aggregate affiliates’ FUM increased by 9% ($8.2 billion) over the six months period, reaching $100.1 billion.

The company’s aggregate retail FUM came in at $25.9 billion. That was up $3.2 billion or 14% from 30 June 2023.

Also likely helping lift the Pinnacle share price today was the $4.5 billion in reported net inflows for the half year. That’s a big improvement from the $1.5 billion in net outflows in 1H FY 2023.

In other key metrics, the ASX 200 financial stock reported net profit after tax (NPAT) of $30.2 million, down 1% from the $30.5 million in 1H FY 2023.

And passive income investors should be pleased with the fully franked interim dividend of 15.6 cents per share. That’s in line with the interim dividend paid out for 1H FY 2023.

The company also highlighted the ongoing medium-term outperformance of its affiliates, noting that 81% of five-year affiliate strategies have outperformed their respective benchmarks. Management said this “consistent alpha generation underpins the ongoing performance fee contributions” from its affiliates.

As at 31 December, Pinnacle had net cash and principal investments of $51.1 million.

Pinnacle share price snapshot

With today’s big lift factored in, the Pinnacle share price is up 16% over the past 12 months. And that’s not including the two fully franked dividend payments.

The post Pinnacle share price leaps 9% as funds swell above $100 billion appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Building wealth in your 30s? I’d buy these ASX shares
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• Bitcoin price predicted to hit $100k this year! I’m buying ASX 200 shares instead
• Why Boss Energy, Core Lithium, Pinnacle, and Syrah shares are rising today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been another busy week for Australia’s top brokers. This has led to the release of a number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Champion Iron Ltd (ASX: CIA)

According to a note out of Goldman Sachs, its analysts have retained their buy rating on this iron ore miner’s shares with an improved price target of $9.40. This follows the release of a strong quarterly update with record production and earnings and cash flow comfortably ahead of expectations. The Champion Iron share price is trading at $8.51.

CSL Limited (ASX: CSL)

A note out of Citi reveals that its analysts have retained their buy rating and $325.00 price target on this biotechnology company’s shares. Citi highlights that a number of the company’s rivals have released positive updates that support its bullish view. This includes strong overall demand for immunoglobulins and potential market share gains for CSL. The CSL share price is fetching $299.83 on Friday.

Capricorn Metals Ltd (ASX: CMM)

Analysts at Bell Potter have retained their buy rating on this gold miner’s shares with an improved price target of $5.95. This follows the release of a quarterly update from the Karlawinda Gold Project which revealed a slight production beat and costs that were effectively in line with forecasts. Outside this, the broker highlights that Capricorn is a sector leading gold producer with a strong balance sheet and a management team with an excellent track record of delivery. The Capricorn share price is trading at $4.65 this morning.

The post Brokers name 3 ASX shares to buy now appeared first on The Motley Fool Australia.

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• 2 world-class ASX 50 shares to buy for your portfolio
• Here are the top 10 ASX 200 shares today
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• Are CSL shares set for an earnings boost?
• Are ASX blue-chip shares actually safe investments?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Goldman Sachs Group. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Adairs Ltd (ASX: ADH) share price is down over 40% in the past year and it has sunk 65% from its peak in April 2021. This could be the right time to invest in the ASX dividend stock with a possible large payout and the prospect of potential capital gains.

Adairs operates three different businesses – Adairs, Mocka and Focus on Furniture.

Many ASX retail shares have quite cyclical earnings because of the way the economy can go through strength and weakness. Sometimes households don’t have as much money to spend and that is materially hurting demand and sales.

The ASX dividend stock hasn’t exactly seen its sales sink, but a decline can lead to a huge loss of investor confidence.

Weak FY24 expected

At the company’s AGM, it said group sales in the first 21 weeks of FY24 were down 9%. It said the impact of higher interest rates and the cost of living pressures has seen a “significant” decline in traffic across each business of around 10%.

It also said the outlook for the rest of FY24 is expected to remain “challenging” because of the economic headwinds and the business is being managed accordingly.

With this in mind, it’s understandable that the Adairs share price has fallen. But, investing should be a long-term endeavour and what happens in one year won’t decide its long-term performance. It could be a good contrarian opportunity now with a possible economic rebound not too far away.

The current estimate on Commsec is that the ASX dividend stock may generate earnings per share (EPS) of 16.2 cents.

The potential recovery

I’m not banking on interest rate cuts starting this year, nor do I think they’re going to go down to 2% in rapid succession. But, I do think the impending start of cuts could spur an earnings recovery and perhaps excite investors about the Adairs share price.

On Commsec, the forecast suggests Adairs’ EPS could rise 36% in FY25 and then go up another 25% to 27.5 cents per share in FY26. That would put the company at 7.5x FY25’s estimated earnings and 6x FY26’s estimated earnings.

No-one should focus too much on the specific forecast numbers for the ASX dividend stock, the actual numbers could be better or worse than the predictions.

But, I’d point out that, generally, central banks won’t want to be restrictive forever and recent wage inflation may help household spending in the future when finances aren’t as tight.

I think FY19 was a good example of weakness and then subsequent recovery for its performance, though history won’t necessarily repeat itself.

When the company emerges from this period, it could be much more profitable than before.

Adairs is working on a number of initiatives to grow profit such as opening larger stores that are more profitable and it can showcase more of its products. It’s also planning to keep opening new stores, with plans for a national rollout of Focus on Furniture stores. There’s also the possibility that Adairs’ (paying) membership numbers and online sales could keep growing over time.

Costs have increased during this inflationary period, but Adairs has recently taken control (from DHL) of its national distribution centre which could make a material difference in the medium-term to margins and operational efficiency.

ASX dividend stock forecast payouts

In FY24, the Adairs dividend may only be 4.3 cents per share (according to Commsec) amid these difficult economic circumstances. It’s possible it may not even pay a dividend.

But, in FY25 Adairs is forecast to pay an annual dividend per share of 14.5 cents if earnings rebound as predicted. That would be a grossed-up dividend yield of 12.5%.

FY26 could see the business pay an annual dividend per share of 19.4 cents, which would be a grossed-up dividend yield of 16.8%.

The short-term outlook is weak, but that’s why we’re being presented with a more attractive Adairs share price today, which could mean big dividend yields in the future.

The post 1 ASX dividend stock down 65% to buy right now appeared first on The Motley Fool Australia.

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More reading

• This ASX 300 dividend share is projected to pay a 16% yield in 2026!
• 3 ASX shares I’d buy today for big dividend income in 2025
• Why Adairs, Alumina, ResMed, and WiseTech shares are storming higher

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Flight Centre Travel Group Ltd (ASX: FLT) shares used to be very popular with income investors.

The travel agent giant would regularly pay big (and growing) dividends to its shareholders each year.

However, these payouts have not recovered fully yet from the pandemic.

For example, the Flight Centre dividend that was paid out in FY 2023 was just a modest 18 cents per share.

This equates to a 0.85% dividend yield at current prices, which is hardly anything to get excited about.

But will that change for investors in FY 2024? Let’s take a look and see what analysts are predicting from Flight Centre.

How big will the Flight Centre dividend be in 2024?

According to a note out of Citi, its analysts expect the Flight Centre dividend to become more attractive this year.

And while the broker isn’t necessarily expecting a big yield, it will be close to resembling what investors became accustomed before COVID ruined the party for them.

The note reveals that Citi has pencilled in a fully franked 49 cents per share dividend for the year, which represents a 2.3% yield for investors.

In addition, the broker sees decent upside for its shares from current levels. It has a buy rating and $23.60 price target on Flight Centre’s shares.

This implies potential upside of 11% for investors over the next 12 months, which brings the total potential return to beyond 13%.

And if you’re willing to be patient, Citi thinks you will be rewarded with some bigger dividends in the coming years.

The broker is expecting an increase to 77 cents per share in FY 2025 and then another increase to 84 cents per share in FY 2026. If this proves accurate, it will mean fully franked yields of 3.6% and 3.9%, respectively.

The post How big will the Flight Centre dividend be in 2024? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Microsoft (NASDAQ: MSFT) is the world’s second-largest company in terms of market capitalization, valued at $3 trillion as of this writing. The stock’s impressive 67% jump in the past year — fueled by its artificial intelligence (AI) prospects — has played a key role in helping the tech giant reach that position.

However, Nvidia (NASDAQ: NVDA) has witnessed a much bigger jump in its market cap over the same period. It is now the sixth-largest company in the world, valued at $1.5 trillion, up from less than $500 billion a year ago. Microsoft, for comparison, was valued at $1.8 trillion a year ago. The following chart shows the magnitude by which Nvidia’s market cap jump has outpaced Microsoft’s over the past year.

NVDA Market Cap data by YCharts.

Just like Microsoft, Nvidia is reaping the benefits of growing AI adoption, though in a much bigger way. The semiconductor giant has been growing much faster than Microsoft, which explains why its stock price growth has outpaced the latter. However, can Nvidia sustain its faster growth and become more valuable than Microsoft by 2030? Let’s find out.

Microsoft’s AI business has gained impressive traction

Microsoft is providing AI-enabled software and services to customers. These include generative AI-powered web search through Bing, an AI-enabled web browser in the form of Edge, and an AI companion known as Copilot that aims to boost productivity through numerous tools, such as allowing users to create images from text prompts, draft documents, create presentations, and summarize emails, among other things.

Additionally, Microsoft is looking to capitalize on the growing demand for cloud-based AI services. The tech giant’s Azure OpenAI service gives its customers access to multiple large language models on a pay-as-you-go model. As a result, Microsoft customers can develop generative AI applications without investing in expensive hardware.

The good part is that Microsoft’s Azure OpenAI service has already gained solid traction. The company points out that “more than 18,000 organizations now use Azure OpenAI service, including new-to-Azure customers.” This puts the company in a nice position to capitalize on the fast-growing and lucrative AI cloud computing market, which is expected to generate annual revenue of $274 billion in 2029, compared to $67 billion in 2024.

It is worth noting that Microsoft’s cloud business has started growing at a faster pace than its rivals. The company’s Azure cloud service recorded 29% growth in the third quarter of 2023, outpacing Google Cloud’s jump of 22% and Amazon Web Services’ 12% growth. Microsoft management pointed out that it saw an acceleration of 3 percentage points in Azure revenue thanks to AI. So, it won’t be surprising to see the company gain more share of this fast-growing market.

In all, the rollout of AI across multiple Microsoft services could help the company generate an additional $100 billion in annual revenue by 2027, according to investment banking firm Evercore. That would be a big boost for Microsoft, given that it has generated $218 billion in revenue in the trailing 12 months. However, investors should note that the company believes its AI-focused business will scale up gradually.

What’s more, a look at consensus growth estimates suggests that Microsoft’s revenue is anticipated to increase in the mid-teens over the next couple of fiscal years.

MSFT Revenue Estimates for Current Fiscal Year data by YCharts.

AI is driving much stronger growth at Nvidia

While Microsoft is a play on the software side of the AI market, Nvidia sells the hardware on which the services that the former is selling are trained. For instance, OpenAI used an estimated 30,000 graphics cards from Nvidia to train ChatGPT. Market research firm Omdia estimates that Microsoft purchased an estimated 150,000 units of Nvidia’s flagship H100 AI-focused graphics card in 2023.

Given that each of these graphics processing units (GPUs) is priced at an average of $40,000, Microsoft would have paid Nvidia an estimated $6 billion for these chips last year. Microsoft, however, is not the only customer in line for Nvidia’s AI processors. Other tech giants, such as Meta Platforms, Amazon, Alphabet, Oracle, and Baidu, are also procuring Nvidia’s AI chips to train AI models.

As it turns out, the demand for Nvidia’s H100 processors is so strong that they reportedly command a waiting period of 36 weeks to a year. That’s not surprising as Nvidia controls an impressive 85% of the market for AI chips, according to investment bank Raymond James. Given that the AI chip market is anticipated to grow at an annual pace of 38% through 2032 and generate annual revenue of roughly $384 billion, Nvidia’s dominant position in this market explains why analysts are upbeat about the company’s long-term growth.

According to Japanese investment bank Mizuho, Nvidia may even generate annual revenue of $300 billion by selling AI chips in 2027. Even though that estimate seems quite ambitious, it shows just how big of an impact AI will likely have on its business compared to Microsoft, whose AI-focused revenue in 2027 could be a third of Nvidia’s, as per Evercore. This also explains why Nvidia’s earnings are anticipated to grow much faster than Microsoft’s.

Can Nvidia indeed be worth more than Microsoft?

According to consensus estimates, Nvidia’s earnings could increase at an annual rate of 102% over the next five years. The company ended fiscal 2023 with earnings of $3.34 per share, meaning its bottom line could jump to $107 per share if it keeps doubling each year for the next five years. Using the Nasdaq-100 index’s forward earnings multiple of 29 as a proxy for tech stocks, Nvidia’s stock price could hit $3,100 in five years. That would be 5x the company’s current stock price.

Microsoft, on the other hand, is predicted to clock annual earnings growth of 15% for the next five years. Using its fiscal 2023 earnings of $9.81 per share as the base, Microsoft’s bottom line could increase to $19.73 per share after five years. That points toward a stock price of $572, using the Nasdaq-100’s forward earnings multiple, an increase of just 41% from current levels.

So, Nvidia could become a bigger company than Microsoft before 2030 in terms of market cap, given the much faster growth it may achieve because of its dominant position in the AI chip market. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Will Nvidia stock be worth more than Microsoft by 2030? appeared first on The Motley Fool Australia.

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More reading

• Yes, Microsoft is a star AI stock, but this is what really powered its solid second-quarter results
• Two giants of the Nasdaq just reported their results. Did they smash expectations?
• 3 things ASX investors should watch this week
• Here’s how the ASX 200 market sectors stacked up this week
• Better AI stock: Microsoft vs. Amazon

Harsh Chauhan has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Baidu, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool Australia has recommended Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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