Currently, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is trailing Apple (NASDAQ: AAPL) in the race to join Nvidia (NASDAQ: NVDA) in the $5 trillion market-cap club. Apple is just over $200 billion in market cap away from joining, while Alphabet is about $1 trillion away following its sell-off.
However, I think Alphabet can overcome this deficit if the market comes to its senses. Alphabet’s business can actually justify a $5 trillion market cap, while Apple’s is questionable. It’s all because of one factor: valuation.
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Alphabet’s financials are more representative of a $5 trillion company than Apple’s
When comparing Alphabet and Apple, it’s clear that they are two entirely different businesses. Apple stakes its company on the success of its hardware business, although it generates a fair bit of revenue from its services as well. Alphabet is more software focused. Alphabet clearly has some hardware exposure, but it also has a cloud computing business that involves purchasing hardware and renting it back out to clients. Regardless, both companies have proved their merits over the long term.
However, Alphabet looks to be the stronger company. From a revenue standpoint, Apple is still outperforming Alphabet. But that’s not nearly as important for companies this size. What matters is how the company uses that revenue, and investors are more focused on profits. From a net income standpoint, Alphabet is starting to put some distance between itself and Apple.
With Alphabet’s $160 billion in net income (as of the first quarter of 2026), it has significantly more net income than Alphabet. All else being equal, that would place Alphabet far ahead of Apple in terms of valuation. But that’s not the case at all. Because the market values Apple in a higher regard, Apple’s stock is worth far more.
However, I think the relationship is starting to get a bit strained.
Apple’s valuation has become stretched
There’s always a question about what a fair price to pay for a stock is. Some stocks will always trade at a premium, whether that’s through visionary leadership, strong long-term execution, or being in a reliable industry. However, there’s a limit as to what all of those factors can earn, and Apple is toying with it.
From a trailing-earnings standpoint, Apple is incredibly expensive and approaching five-year highs. Meanwhile, Alphabet is at the higher end of its range but still fairly close to average.
For reference, the S&P 500 trades for 25.5 times trailing earnings, so Alphabet is nearly in line with the broader market, while Apple commands a massive premium. When forward earnings are utilized, this relationship doesn’t improve.
Apple’s earnings aren’t expected to grow that much throughout the year, so the stock will still look expensive at the end of the year even if Apple hits all analyst projections. Meanwhile, Alphabet looks reasonably priced. So, what does this mean for the race to become a $5 trillion company?
If the market comes to its senses and values Apple’s stock for what it really is, it could have a tough time reaching the $5 trillion threshold. The company just doesn’t have the finances to justify this level. However, Alphabet does, and if it traded at the same valuation as Apple, it would already be a part of the $5 trillion club.
As a result, I think Alphabet will get there first even if it takes some time. Over the long term, I’m far more confident in Alphabet’s growth strategy, so even if Apple beats Alphabet to the $5 trillion level, I think Alphabet will easily get to $6 trillion first.
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Keithen Drury has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.
