Key Points
Apple (NASDAQ: AAPL) has narrowed the valuation gap with Nvidia (NASDAQ: NVDA) for the title of the world’s largest company. Apple is approaching a $5 trillion market capitalization, while Nvidia recently traded just below $5.5 trillion. However, fundamental growth trajectories suggest Nvidia is positioned to extend its lead over the coming year.
Provided the artificial intelligence infrastructure build-out continues as guided by major technology firms, Nvidia’s growth rate is likely too substantial for Apple to match. This dynamic could result in Nvidia establishing a commanding valuation advantage that may persist for the foreseeable future.
Image source: Getty Images.
Context Behind Apple’s Recent Market Performance
On a fundamental basis, Apple’s recent operational metrics are modest relative to its semiconductor peer. In its most recent quarter, Apple reported revenue growth of 16%, a figure that pales in comparison to the 106% year-over-year growth Nvidia delivered in its latest earnings report. However, this divergence reflects divergent strategic postures.
Apple has not pursued an aggressive capital allocation strategy toward AI infrastructure. In fact, its capital expenditures have declined in recent quarters.
AAPL Capital Expenditures (TTM) data by YCharts
Over the trailing twelve months, Apple’s capital expenditures totaled approximately $10 billion. By contrast, major AI hyperscalers are deploying upwards of $200 billion annually. This restraint has attracted investors seeking technology exposure without direct AI cycle risk, driving Apple’s valuation to elevated levels.
From a price-to-earnings (P/E) perspective, Nvidia currently trades at a significant discount to Apple.
AAPL PE Ratio data by YCharts
This valuation disparity is notable given the growth differential. In a hypothetical blind comparison, a company growing at 106% trading at 29 times earnings would typically be preferred over one growing at 16% at 39 times earnings. The market’s current preference for Apple appears driven by risk aversion toward AI-exposed equities rather than fundamental superiority.
Nvidia’s Projected 2027 Growth Largely Unreflected in Current Valuation
Nvidia’s trailing P/E of 29 times aligns with historical norms for large-cap technology stocks. However, the company is forecasting extraordinary growth for its 2027 fiscal year. During its most recent conference call, management guided for approximately 70% revenue growth next year, indicating substantial remaining demand for AI infrastructure.
Critically, the forward valuation multiple suggests this growth is not yet priced in. Nvidia trades at roughly 14 times consensus forward earnings estimates for the next fiscal year.
AAPL PE Ratio (Forward 1y) data by YCharts
Meanwhile, Apple trades at approximately 31 times forward earnings. If Nvidia meets its growth targets and its multiple re-rates toward its current trailing multiple of 29 times by the end of the next fiscal year, the share price would theoretically double. Such a scenario would significantly widen the market capitalization gap between the two companies, requiring only a reversion to a historically reasonable valuation and execution on existing guidance.
This represents a low threshold for outperformance, supporting the view that Nvidia will likely retain its position as the world’s largest company by market capitalization through 2027, contingent on the AI investment cycle proceeding as anticipated.
Disclosure: The author holds positions in Nvidia. The publisher holds positions in and recommends Apple and Nvidia.