Key Points
- AppLovin’s (APP) 4,600% return since November 2022 dwarfsNvidia’s 1,000% gain, driven by its AI-powered Axon platform and 60% revenue growth.
- Its inclusion in theS&P 500on Sept. 22 signals potential for further upside as AI continues to reshape industries.
- APP’s rapid valuation melt-up still warrants caution by investors.
- It sounds nuts, but SoFi is giving new active invest users up to $1k in stock, see for yourself (Sponsor)
The release of ChatGPT in November 2022 unleashed an artificial intelligence (AI) revolution, catapultingNvidia(NASDAQ:NVDA) to a 1,000% return as its graphics processing units (GPUs) became essential for AI models.
The chatbot’s debut highlighted AI’s transformative potential, pushing Nvidia’s stock from $15 per share (split-adjusted) to over $180. With a market cap exceeding $4.5 trillion, Nvidia stands as the world’s most valuable stock.
Yet, another company has outshined it, delivering a staggering 4,640% return — 4.6 times better than Nvidia’s performance — over the same period. That’s a remarkable return for a company just selling mobile advertising, but its performance propelled it to new heights and on Sept. 22 it joined theS&P 500index — replacingMarketAxess Holdings(NASDAQ:MKTX). The move underscores its rapid ascent in the tech world and reflects strong market confidence.
AI Fuels a Mobile Ad Surge
AppLovin‘s (NASDAQ:APP) rise has been driven by its AI-powered platform that optimizes ad placements for mobile and gaming app developers. While Nvidia dominates AI hardware, AppLovin has harnessed software to thrive in the mobile ecosystem, capitalizing on the AI frenzy sparked by ChatGPT.
AppLovin seized this opportunity with its Axon 2 platform, launched in 2023, which uses machine learning to enhance ad targeting. This fueled revenue growth from $2.8 billion in 2022 to $4.7 billion last year, a 67% jump. So far this year, revenue hit $2.4 billion, up 74% from the same point a year ago. With earnings at $2.39 per share in Q2, beating estimates by 20%, APP’s adjusted EBITDA margin reached 81%, driven by AI-driven efficiencies and outpacing industry norms.
AppLovin’s success stems from its ability to process vast datasets, predicting user behavior to deliver targeted ads. This efficiency has attracted developers facing rising competition in the AI-driven app market. Unlike Nvidia’s hardware focus, AppLovin’s software leverages AI to streamline marketing, proving that the AI boom extends beyond chips.
Loading stock data...Dominating the Mobile Marketing Arena
AppLovin’s platform integrates app discovery, monetization, and analytics, handling billions of daily interactions. This creates a flywheel: more apps generate richer data, improving AI models and drawing larger clients. While gaming accounts for 70% of revenue, e-commerce and consumer brands saw significant growth last year. The 2022 acquisition of MoPub from Twitter enhanced its real-time bidding capabilities, strengthening its competitive edge.
The platform now supports 1.6 billion daily active users, up from 1 billion in 2022, enabling premium ad rates. Its contextual AI targeting adapts to privacy changes like Apple’s App Tracking Transparency, maintaining effectiveness without relying on personal data.
Financially, AppLovin is robust, with $550 million in cash and $2.1 billion in operating cash flow, though it carries about $3.5 billion in long-term debt. R&D investment rose 25% to $400 million in 2024, targeting the $447 billion mobile ad market, expected to reach $462 billion by 2027.
Can AppLovin Sustain Its Momentum?
Several factors suggest continued growth. Planned Axon upgrades with generative AI could further boost margins by automating ad creation. Until now, AppLovin has primarily focused on the U.S. for its e-commerce and digital advertising, but it is entering new international markets in Europe and Asia, a critical global push as it targets 20% to 30% long-term annual growth.
S&P 500 inclusion may drive $5 billion to $10 billion in index fund inflows, with historical data indicating a 5% to 10% price increase after inclusion, but at a $227 billion market cap and trading at 47 times forward earnings, AppLovin’s valuation has gotten a bit out of alignment with its growth prospects.
There are risks, too, including volatility in the ad market and competition from larger, better financed giants likeMeta Platforms(NASDAQ:META) and Google. A 2025 short-seller report alleging overstated metrics caused a 57% stock dip, but first-quarter results dispelled concerns, sparking a rebound.
Key Takeaway
AppLovin’s data moat and AI focus provide resilience against such challenges, but its valuation has gotten pricey. APP stock seems more appropriate for aggressive, risk-tolerant investors at this point, with more conservative ones better served by waiting for a pullback from these lofty heights.
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