Key Points
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Apple has surged to once again become the world’s largest company, but its valuation has climbed, and it does face some risks.
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Nvidia continues to grow rapidly, and its stock is cheap.
- 10 stocks we like better than Nvidia ›
On July 17, Apple (NASDAQ: AAPL) overtook Nvidia (NASDAQ: NVDA) to reclaim the title of the largest company in the world. However, after Apple’s strong run, Nvidia may once again be the better stock to buy.
Let’s take a closer look at each stock to decide.
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Apple
Apple has had a strong year, with its stock up more than 22%. The outperformance comes despite the company dealing with higher input costs from components like memory. However, in response, it has significantly raised prices for both hardware and some of its services that include cloud storage.
While the higher device prices could help lift revenue, there is a risk that it could also impact upgrade cycles. According to a poll by 9to5Mac, more than 90% of those surveyed said the higher prices would impact their buying habits, with nearly 40% saying they’d upgrade less often. That does add a potential risk at a time when the stock is sitting near all-time highs.
Apple’s valuation has also risen. The stock now trades at a forward P/E of 34 times fiscal 2027 analyst estimates. It has frequently traded at a one-year forward P/E of around 24 times over the past several years, and this is its highest valuation during that stretch.
That said, Apple does have one of the best compounding business models out there. Once a user buys one of its devices, they tend to get locked into its ecosystem and use more of its high-margin services, including cloud storage, Apple Pay, and subscriptions.
One of its biggest revenue and profit contributors, meanwhile, is its revenue-sharing deal with Alphabet, which makes Google the default search engine on Apple’s devices. This brings in more than $20 billion in revenue that falls straight to operating profit.
Nvidia
From purely a valuation standpoint, Nvidia now looks like the much more attractive stock than Apple. It trades at a forward P/E of only 16 times analyst estimates for fiscal year 2028 (ending January 2028), and it has continued to grow its revenue and profits at a breakneck pace.
The company is the dominant player in AI infrastructure with its graphics processing units (GPUs), especially when it comes to large language model (LLM) training. Nvidia has established a wide moat in this area due to its CUDA software platform, which it smartly gave away to universities and research labs that were doing early work on AI. As a result, most foundational AI code has been written on its software platform for its GPUs, which is why it is poised to remain the leader in AI model training.
However, the company has not sat still. Nvidia has a premier networking portfolio that now makes up the plumbing for its complete end-to-end server offerings. It’s also developed its own ARM-based central processing units (CPUs), which are increasingly in demand due to the rise of agentic AI.
Nvidia also wisely “acquired” Groq this year and has integrated its language processing units (LPUs) into its CUDA ecosystem. LPUs use on-chip SRAM (static random-access memory) and are particularly beneficial during the decode phase of inference, letting Nvidia offer servers specifically for this task. With the inference market eventually expected to surpass the market for LLM training, Nvidia is well positioned.
The biggest question surrounding the stock is how long the AI build-out will last. Given the commentary from hyperscalers (owners of large data centers) and foundry Taiwan Semiconductor Manufacturing, there appears to be no let-up in AI infrastructure spending anytime soon, with demand remaining insatiable.
The verdict
Nvidia is the cheaper stock with the better growth outlook. While there is a risk that the AI infrastructure build-out will eventually lose steam, it still looks like it is in the earlier innings. As such, it is the megacap tech stock I’d prefer to buy.
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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Arm Holdings, Nvidia, and Taiwan Semiconductor Manufacturing. 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.
