Apple, Microsoft, and Nvidia Top the List of Largest Companies by Market Cap. Here's the One I'm Buying Now.

At the time of this writing, the three largest companies in the world are Nvidia (NASDAQ: NVDA) at a $5.4 trillion market cap, Apple (NASDAQ: AAPL) at $4.6 trillion, and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) at $4 trillion. There's still a decent gap between Alphabet and fourth-place Microsoft at $3.65 trillion, and an even larger gap to fifth-place Amazon at $2.7 trillion. But of the three largest companies in the world, which one makes the most sense to buy now?

I think there's a pretty clear-cut answer, as one stands out above the rest as a buy. But there's also an obvious stock in the top three that I think investors should avoid.

Image source: Getty Images.

Two of these stocks have clear upside in the near future

Nvidia has risen to the position of the world's largest company thanks to huge demand for its GPU computing units. Artificial Intelligence (AI) demand appears insatiable, with little chance of a letdown. The AI hyperscalers are spending hundreds of billions right now, and Nvidia estimates that the big five will spend nearly $800 billion on data center capital expenditures this year alone. Next year, that figure is projected to rise to $1.3 trillion. That's enough demand for Nvidia to guide for 70% revenue growth next year, easily making it one of the fastest-growing companies in the world, let alone among the top three.

Alphabet is one of those big spenders, and estimates it will spend around $200 billion on data center capital expenditures this year. However, all of that spending is paying off. Alphabet is seeing huge success from its AI platform and is also seamlessly integrating AI overviews into Google Search to maintain its place as the top internet search tool in the world. Alphabet is also running a thriving cloud computing business in Google Cloud. This division is a direct beneficiary of increased computing capacity, and its revenue skyrocketed 82% last quarter. Alphabet has a lot of growth ahead (Wall Street projects 23% growth in 2027), and it's investing to ensure it can capture market share during this critical period.

Apple's growth case is a bit less certain. It must continue to sell tech hardware to a stretched consumer while fighting off rising component prices, specifically in the memory chip space. Apple recently announced several new products, including its latest iPhone generation, which got a $100 price hike. The consumer will need to accept this, or they may decide to stick with the already popular iPhone 17. Furthermore, there still isn't much headway on Apple's AI products, which is a glaring gap in Apple's lineup. Lastly, Wall Street analysts only forecast 10% growth for 2027, which would be significantly slower than the expected growth rates of the other two tech giants.

I think the growth case for Alphabet and Nvidia is far greater than Apple's; however, the market isn't valuing the stocks like that.

Apple's premium valuation doesn't make sense

Apple has long maintained a premium over many stocks in the market due to its excellent execution. However, it now has a new CEO and is dealing with a major issue in soaring memory chip prices. I think this should warrant Apple losing a bit of its premium, but that's not what the market has done.

Alphabet has skewed earnings per share thanks to massive gains on some of its investments, so I'm using the operating price-to-earnings (P/E) ratio to value the stocks.

GOOG Operating PE Ratio data by YCharts

Apple has a premium over these other two stocks, despite expecting to grow at a much slower rate next year. When next year's forward earnings projections are used, it also reveals a major gap in valuations.

GOOG PE Ratio (Forward 1y) data by YCharts

Nvidia's massive growth rate makes it look super cheap when next year's earnings are used, as does Alphabet's. Apple is still priced at a major premium even with next year's growth rate accounted for.

This steers me in one direction: to buy Nvidia stock. I think it's by far the best stock of the three to own, and will provide investors huge returns over the next few years.

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