Apple is more expensive and growing slower than these other artificial intelligence (AI) stocks.
Apple (AAPL +1.78%) stock has done well this year, and it currently sports a $4 trillion market cap, making it the second-largest company in the world behind Nvidia ($4.4 trillion). Investors love the company behind the iPhone, iPad, and the entire Apple computing ecosystem that generates over $400 billion in revenue each year.
However, if we look at the underlying earnings and growth of the business, it is clear that Apple stock is overvalued versus other “Magnificent Seven” companies. Here’s the skinny on why Apple stock will be eclipsed by Alphabet (GOOG +3.26%) (GOOGL +3.50%), with its $3.64 billion market cap, and Microsoft (MSFT 1.48%), with its $3.53 trillion market cap, by year-end 2026 when it comes to total value.
Today’s Change
(1.78%) $4.75
Current Price
$271.00
Key Data Points
Market Cap
$4012B
Day’s Range
$265.54 – $273.33
52wk Range
$169.21 – $277.32
Volume
2.5M
Avg Vol
51M
Gross Margin
46.91%
Dividend Yield
0.38%
Alphabet’s extending lead in AI
Alphabet — the parent company behind Google, YouTube, and Google Cloud — recently set a new bar in artificial intelligence (AI) capabilities with the launch of the Gemini 3 chatbot. Gemini 3 crushes the benchmarks in AI capabilities across language queries, image generation, and deep research. Even though OpenAI’s ChatGPT has more users, Gemini is the best chatbot out there today, according to third-party analysts.
Gemini is now powering AI overviews on Google search results, which management says already has 2 billion users every month. The Gemini app now has 650 million monthly active users (MAUs), making it one of the fastest-growing applications in the world, catching up to ChatGPT quickly. What’s more, 70% of Google Cloud customers are utilizing Gemini, with 13 million developers building on the models. Not only can Alphabet monetize its AI capabilities through consumers, but by selling its capabilities through Google Cloud.
Google Cloud revenue is growing 34% year over year, and while we don’t have figures around Gemini’s revenue growth, it is likely growing much faster. Overall, Alphabet revenue is now growing 15% in constant currency, and with healthy profit margins. With no end in sight to the growing demand for AI, I expect Alphabet’s revenue to keep growing at a double-digit rate over the next few years.
Image source: Getty Images.
Diversified bets on AI infrastructure
While Microsoft has lagged in developing consumer chatbots, it has perhaps been even better than Google Cloud at capturing AI contracts for its cloud computing division, Microsoft Azure.
Azure has signed deals with AI start-ups competing with Google’s Gemini, such as OpenAI and Anthropic, which come with huge sums of projected lifetime spending. For example, just this week, Anthropic cozied up to Azure and committed to buying $30 billion in credits on Azure. Last quarter, Azure revenue grew 39% year over year in constant currency, with overall cloud revenue up 27% to $30.9 billion, or run-rate revenues of $123.6 billion.
Microsoft has plenty going for it with its Office suite of products, too. This revenue segment, which also includes LinkedIn, grew revenue 14% year over year last quarter to $33 billion. At such a large scale, Microsoft is now seeing huge amounts of operating leverage, with operating income of $38 billion last quarter on $77.7 billion in revenue, or a margin of 49%.
Data by YCharts.
Why both stocks will be worth more than Apple
When comparing both Microsoft and Alphabet to Apple, there are two metrics that show why the former stocks are better positioned than the latter to be larger in 2026: growth and price.
Microsoft and Alphabet have grown much faster than Apple in recent history. Over the last three years, Microsoft’s revenue has grown 44% and Alphabet’s has grown 37% (cumulatively). Apple’s is only up 7.4%.
Apple has failed to innovate and bring out successful new products, especially in the AI space, that can drive growth for the business. In fact, it is rumored that the struggling Siri chatbot will be utilizing Gemini in the future, which Apple will be paying Alphabet $1 billion a year for the privilege of.
Apple stock is also priced higher than Microsoft and Alphabet. Apple has a price-to-earnings ratio (P/E) of 36 compared to 34.5 for Microsoft and 29 for Alphabet. So not only is Apple growing slower than its Magnificent Seven peers, but doing so while trading at a higher valuation. I bet this paradigm flips in 2026, leading Microsoft and Alphabet to finish the year with larger market caps than Apple.
