There is a wide gap between the most expensive and cheapest trillion-dollar stock, according to one widely used valuation metric.
Six U.S. companies are valued at $1 trillion or more, and they all operate in the technology sector:
- Apple (AAPL -0.83%): $3.44 trillion
- Microsoft (MSFT -2.02%): $3.16 trillion
- Nvidia (NVDA -3.70%): $3.14 trillion
- Alphabet (GOOGL -1.24%) (GOOG -1.28%): $2.07 trillion
- Amazon (AMZN -2.21%): $1.87 trillion
- Meta Platforms (META -0.60%): $1.33 trillion
All of these companies are profitable, so they can be valued with the widely used price-to-earnings (P/E) ratio. It’s calculated by dividing the share price of a given company by its earnings per share. The Nasdaq-100 index trades at a P/E ratio of 30.9, which is a good reference point:
Data by YCharts.
Nvidia is the most expensive trillion-dollar stock today on a P/E basis. However, the company is growing so quickly it has a forward P/E ratio of just 33.1 based on next year’s earnings forecast. In other words, its valuation is much more reasonable if investors are willing to hold it for a couple of years.
The cheapest stock of the group is Alphabet. A judge recently ruled that Google Search is a monopoly, and the U.S. Department of Justice wants to break up the company to resolve that issue. It could take years — if it happens at all — but combined with growing competition from artificial intelligence chatbots, which are threatening the dominance of Google Search, investors are treading cautiously with respect to Alphabet’s valuation.
Finally, Amazon deserves a mention. It’s on track to generate $635 billion in revenue this year, which is more than any of its peers, and it trades at the cheapest price-to-sales ratio (which divides a company’s market capitalization by its revenue). Plus, its earnings are forecast to grow 63% this year and 23% in 2025, so its elevated P/E ratio might actually be justified.
In summary, a P/E ratio alone isn’t always the best indicator of value. Investors could easily make the case that despite trading at triple the P/E ratio, Nvidia stock is a better buy than Alphabet because of its rapid growth (and Alphabet’s regulatory headwinds).
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
