Apple and Nvidia have recently traded places in the race to become the world’s most valuable company, with each reaching a market value of about $5.08 trillion. But the ranking is only part of the story: where AI profits accrue, access to key components and advanced chipmaking capacity are more consequential for both companies’ prospects. Apple is leaning on on-device AI and its hardware ecosystem, while higher memory prices and constrained advanced-process supply could add to its costs.
AI economics matter more than the market-cap ranking
Apple was the first company to reach market capitalizations of $1 trillion, $2 trillion and $3 trillion. Nvidia was the first to cross $4 trillion and $5 trillion. More recently, as enthusiasm for AI-related trades cooled, Apple shares held up relatively well, bringing the two companies’ valuations close again.
Their rivalry extends beyond valuation. Nvidia is benefiting from data-center spending on AI infrastructure. Apple, meanwhile, aims to use the iPhone, Mac and its own chips to run more AI tasks locally on devices. The two approaches require different forms of computing capacity, with implications for chip demand, supplier bargaining power and how profits are distributed across the industry.
Apple’s on-device AI push coincides with stronger Mac sales
Apple has not built a proprietary model business on the scale of leading AI-model companies. For now, it is emphasizing the ability of its hardware to run models. On its most recent earnings call, the company said Apple Silicon offers advantages in power efficiency, memory bandwidth and on-device inference. It also said customers are using Mac mini systems for agent-based applications and deploying clusters of Mac Studio computers to run frontier models locally.
Mac revenue reached a record $10.4 billion in the quarter ended in June, up 29% year over year and its highest level in several years. The iPhone, meanwhile, is one of the main ways consumers access AI services. But whether device sales and local inference can generate AI-related returns comparable to those from data-center GPUs remains an open question for investors. Much of the current increase in AI spending is concentrated in data centers. Apple still needs to show that it can maintain its hardware edge without controlling the core model layer and expand the revenue contribution from on-device AI.
TSMC capacity and memory prices add to cost pressures
Apple has long used its purchasing scale and supply-chain management to exert significant influence. Memory makers Samsung, Micron and SK Hynix, along with TSMC’s advanced-process capacity, are important parts of its supply chain. As demand for AI servers has risen, Nvidia and other AI companies have increased their calls on advanced chips and memory, tightening the competition for suppliers’ resources. Apple may therefore find it harder than in the past to secure additional capacity quickly as its needs change.
On its first-quarter earnings call, Apple said constraints on advanced-process capacity were limiting supply and reducing its flexibility to increase output. Management also said memory costs had risen in successive quarters: procurement costs in the March quarter were higher than in the December quarter, and costs in the June quarter were higher than in March. The company expects them to rise again in the quarter ending in September.
Apple said inventory purchased earlier should partly cushion costs in the September quarter, with lower costs for some non-memory components providing an additional offset. But the benefit from that inventory is expected to fade, and memory-market prices could continue rising after September. Apple said the DRAM market is dominated by three suppliers and that it is assessing its supply options. Adding suppliers could help secure supply, but the effect on prices is uncertain.
Margin guidance and supply constraints cloud growth
Excluding a one-time benefit from tariff refunds, Apple expects gross margin of 46% to 47% next quarter. That range would put margins back around levels seen in 2023. The company also expects supply constraints to persist in the September quarter, potentially weighing on revenue growth. Market expectations for Apple’s revenue were lowered after it reported its June-quarter results.
Cost pressures warrant particular attention because Apple sells to consumers, unlike Nvidia, and may not be able to offset higher component prices fully through price increases. In recent years, Apple’s margin gains have been supported both by a higher share of services in its business and by improved hardware supply-chain efficiency. Whether those advantages can absorb further memory-price increases as inventory buffers shrink will shape its future profitability.
Valuation gap reflects different growth expectations
The market expects Apple to sustain double-digit revenue growth, supported in part by product pricing and demand for devices capable of on-device AI. Earnings-per-share growth, however, is expected to slow considerably. Valuation comparisons put Apple’s price-to-earnings-to-growth ratio at about 2 or higher, versus 0.5 or less for Nvidia; Apple also trades at a higher price-to-earnings multiple. On forward earnings, Apple is valued at about 36 times.
The gap reflects differing views of the companies’ growth prospects. Some investors worry that Nvidia’s growth may be cyclical, while others expect Apple to work through its supply and cost challenges over time. Apple also faces uncertainty over whether AI-native hardware could alter competition in its device ecosystem, including products associated with Meta or OpenAI. For now, the more measurable issues are memory prices, advanced-process capacity, gross-margin guidance and progress in turning on-device AI into revenue.