Apple Now Trades at Twice Nvidia’s Forward P/E
Apple and Nvidia sit within $250 billion of each other in market value, yet one trades at a multiple more than twice as rich as the other. That gap raises a sharp question about which stock carries more risk right…
Apple (NASDAQ:AAPL | AAPL Price Prediction) closed Monday, October 19, at $342.94, just under its 52-week high of $348.15. NVIDIA (NASDAQ:NVDA) closed at $217.09, about 11% below its peak of $243.37.
Apple and NVIDIA are worth $5.00 trillion and $5.24 trillion. Yet you pay 37 times expected earnings for Apple and 18 times for NVIDIA, so Apple’s forward multiple is about 2.1 times NVIDIA’s.
Revenue growth points the other way. Apple’s June-quarter revenue rose 16.36%, while NVIDIA’s latest quarterly revenue rose 105.85%.
Trailing Earnings Narrow the Gap
On trailing earnings, Apple trades at 39 times and NVIDIA at 27 times, a gap of about 1.4 times. Forward P/Es rely on analyst estimates, and those estimates differ from one data provider to the next.
NVIDIA’s forward multiple is well below its trailing one because analysts expect EPS to rise from 9.3124 this fiscal year to 15.9146 next year. Apple’s two multiples sit close together, which signals slower expected growth. A multiple is most useful when compared with the growth it is expected to deliver.
| Metric | Apple | NVIDIA |
|---|---|---|
| Forward P/E | 37 | 18 |
| Trailing P/E | 39 | 27 |
| One-Year Gain | 36.44% | 18.77% |
| Year-to-Date Gain | 26.49% | 16.67% |
Apple’s Premium Pays for Stability
iPhone revenue rose 22% to $54.3 billion, Services set a June-quarter record of $30.7 billion, and paid subscriptions passed 1.5 billion. Apple also returned $33 billion to shareholders.
But management forecast September-quarter growth to 9% to 11% and gross margin to 47% to 48%, and about one percentage point of that margin comes from tariff refunds. On the July 30 call, Tim Cook described “a 100-year flood on the memory pricing.”
NVIDIA’s Discount Assumes a Slowdown
Data Center revenue reached $89.02 billion, and NVIDIA forecast next-quarter revenue to $108.0 billion. Next fiscal year should still see roughly 70% growth despite supply limits.
The discount reflects questions about how long cloud spending continues, about custom chips built by its biggest customers, and about China, which guidance leaves out. Supply obligations of $279.0 billion become a burden if demand cools.
Apple Has More Room to Fall
If NVIDIA earns what analysts expect, its multiple shrinks further at today’s price. If Apple’s growth slows while memory costs rise, a 37 multiple has more room to contract, so I see Apple’s risk as greater.
Apple’s one-year gain of 36.44% beat NVIDIA’s 18.77%, even though Apple’s revenue grew more slowly. Because both companies are among the largest by market value, investors in market-cap-weighted index funds have significant exposure to both.
Apple’s Premium Leaves Little Room for Error
Apple looks expensive at 37 times forward earnings. The business is excellent, but guided growth of 9% to 11% and margin pressure from memory costs leave little room for disappointment.
NVIDIA looks cheaper relative to its growth because analysts expect far faster earnings growth at a forward multiple of 18. Its next report, expected around November 18, though the company has not confirmed the date, will test that view. The key test for Apple is whether holiday-quarter iPhone demand exceeds supply constraints, because that quarter has to justify the premium.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
