The $5 Trillion Club: Which Is the Better Stock to Own, Apple or Nvidia?
Key Points
Nvidia is the cheaper stock and has been growing more quickly.
Apple has a great compounding business model and is the safer of the two stocks.
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Only two companies in the world have ever reached a $5 trillion market cap: Apple (NASDAQ: AAPL) and Nvidia (NASDAQ: NVDA). To reach those heights, both are obviously great companies, but which stock looks like the better long-term buy?
In my view, Nvidia has more upside, but it also carries more risk than owning Apple. Let's dig into the two tech stocks.
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Nvidia
Nvidia has shown some of the best growth among megacap tech companies over the past five years. In its fiscal year 2023 (ending January), it recorded nearly $27 billion in revenue, while this year (fiscal 2027), analysts project it will generate nearly $412 billion in revenue. That's an astonishing 15-fold increase over five years off a high base. Incredibly, the company has forecast that it will grow its revenue by another 70% next fiscal year.
Nvidia's growth is coming from the insatiable demand for compute power associated with the artificial intelligence (AI) infrastructure build-out. Its graphics processing units (GPUs) are the main chips used to run AI workloads, and it has created a wide moat for AI model training through its CUDA software platform, where most original AI code was written.
Meanwhile, Nvidia has positioned itself well for the next phases of AI. The inference market is now growing faster than the one for training and is expected to become the much larger market of the two. On this end, the company made a smart move when it "acquired" Groq and its language processing unit (LPU) technology earlier this year. Groq's SRAM-based (static random-access memory) chips are great for speeding up the decode phase of inference, where models give their response to queries, while its GPUs can be used for the more compute-heavy prefill phase. At the same time, Nvidia has developed its own Arm-based central processing units (CPUs), which are becoming more important with the rise of agentic AI.
Combined with its world-class networking portfolio, Nvidia now offers complete turnkey AI factories specifically designed to handle different AI tasks, like training, inference, and AI agents. This should be the company's next big growth driver.
Image source: The Motley Fool.
Apple
Apple does not have nearly the type of revenue growth that Nvidia has; however, it does have a very sticky business that compounds tremendously over time. This can be seen in its earnings-per-share (EPS) growth over the past five years, which has gone from $6.11 back in fiscal 2022 to a projected $8.83 this fiscal year, representing 45% growth, on only a 21% increase in revenue over the same stretch.
The iPhone remains the company's most important product, making up around half its overall revenue and approximately 70% of its product revenue. Smartphones and its other devices have pretty typical replacement cycles, which give it a recurring type of revenue stream on the hardware side of its business. Meanwhile, the company has an opportunity to ramp up its device sales with the recent launch of its higher-priced foldable iPhone.
The real beauty of Apple's business, though, is that it attracts an affluent customer base that it locks into its sticky ecosystem. Once consumers buy Apple devices, they tend to stay loyal to the brand and generate high-margin service revenue for the company. This includes things like its revenue-sharing deal with Alphabet for Google Search to be the default search engine on its devices, selling cloud storage, taking commissions on apps and subscriptions, and getting a small cut on transactions paid through Apple Pay.
The better stock to own
Nvidia is the cheaper stock and has more growth potential, giving it higher upside. The stock trades at a forward price-to-earnings (P/E) ratio of 13.5 times fiscal 2028 (ending January 2028) estimates versus 36 times for Apple's fiscal 2027 (ending November 2027). Apple, meanwhile, is projected to be a mid-teens EPS grower, while Nvidia is projected to grow its EPS at a much higher percentage over the next few years.
That makes Nvidia the better buy in my book. However, it does carry more risk, and if there is a big slowdown in the AI infrastructure build-out, it will be one of the AI stocks most exposed to the fallout.
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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Arm Holdings, and Nvidia. The Motley Fool has a disclosure policy.
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