Can Apple Overtake Nvidia as the World's Largest Company in 2027?

Apple (NASDAQ: AAPL) has closed the gap with first-place Nvidia (NASDAQ: NVDA) as the world's largest company. Apple is about ready to cross the $5 trillion valuation threshold, while Nvidia has faltered a bit in recent days and is valued at just under $5.5 trillion. But can Apple overtake Nvidia over the next year?

As long as the artificial intelligence build-out progresses as every company has guided for, I'd say the answer is a resounding "No." Nvidia's growth will be too much for Apple to compete with, resulting in Nvidia opening a commanding lead that may never be closed.

Image source: Getty Images.

Why has Apple been succeeding recently?

On paper, Apple isn't the most impressive company. In its most recent quarter, it grew revenue by 16%. That's not bad, but it doesn't hold a candle to the 106% growth Nvidia delivered during its last quarterly earnings report. But I don't think that's the point.

Apple hasn't gone all-in on AI like some of its peers have. In fact, its capital expenditures have fallen in recent quarters.

AAPL Capital Expenditures (TTM) data by YCharts

Over the past 12 months, Apple's capital expenditures have totaled a mere $10 billion. If you look at some of the big AI hyperscalers, they're spending up to and over $200 billion this year alone. That makes many investors nervous, so they're shifting into a company that isn't going all-in, yet still has some tech exposure. As a result, Apple has become a popular stock pick for those wanting to escape the AI investment trend. However, this excitement has led to Apple's valuation swelling.

From a price-to-earnings (P/E) standpoint, Nvidia's value is far lower than Apple's.

AAPL PE Ratio data by YCharts

This is odd for a handful of reasons, but first and foremost is growth. If you were handed two stocks in a blindfolded test where one is growing at a 16% rate and valued at 39 times earnings, and another is growing at a 106% rate and valued at 29 times earnings, you'd pick the higher growth, lower valued stock every time. But because it has "AI" attached to it, the market isn't in love with Nvidia's stock like it is with Apple's.

I think this is a major mistake, and this mistake is your opportunity to make a boatload of money.

None of Nvidia's projected 2027 growth is priced into the stock

Nvidia's 29-times-earnings valuation is pretty average for where most big tech stocks have historically traded. However, Nvidia is expected to produce extraordinary growth in 2027. In its most recent conference call, Nvidia informed investors that it expects 70% revenue growth next year. Clearly, there's plenty of AI growth left in the tank for Nvidia, and this will result in Nvidia opening up its lead.

As of now, almost none of Nvidia's 2027 growth is priced into the stock, as it trades for a mere 14 times next year's earnings.

AAPL PE Ratio (Forward 1y) data by YCharts

Meanwhile, Apple trades at 31 times earnings. If Nvidia's results come in as expected and the stock can rise to its current 29 times trailing earnings by the end of next fiscal year, it would indicate that Nvidia will double. That would open up a huge gap between it and Apple, and all it has to do is return to a pretty reasonable price tag and execute.

That's a low bar to clear, and I think it makes it pretty clear that Nvidia will still be a larger company than Apple next year, as long as the AI build-out progresses as everyone expects.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool has a disclosure policy.