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Apple set to overtake Google as world's second-most valuable company: What's driving the surge?
Apple is set to overtake Alphabet as the world's second-most valuable company as investors back its AI strategy, strong services growth and rising market value.
Apple is very close to becoming the world's second-most valuable company, behind Nvidia. Based on current market value, Apple is worth about $4.56 trillion, while Google parent Alphabet is worth around $4.43 trillion. This means Apple is likely to move ahead of Alphabet if its stock continues to perform well.
Nvidia is still the world's most valuable company with a market value of about $4.78 trillion, but the gap between Nvidia and Apple has become much smaller, according to Dow Jones Market Data. Apple's market value is now only about $200 billion lower than Nvidia's, showing how quickly Apple has gained ground.
Why Apple is catching up to Nvidia
A year ago, the difference between Nvidia and Apple was much bigger. On August 4, 2025, Nvidia was worth $1.37 trillion more than Apple, the biggest gap between the two companies since Apple lost the top spot. Apple has climbed higher because investors have continued buying its shares even though the company has faced questions over its artificial intelligence (AI) plans and rising component costs.
Why investors are backing Apple
At the same time, Nvidia's stock has slowed down after a massive rally over the past few years. Many investors are now looking for AI investment opportunities beyond Nvidia instead of putting all their money into one company, according to Mike Reynolds, Vice President of Investment Strategy at Glenmede, via Marketwatch.
"Investors looking for AI plays beyond Nvidia," Mike Reynolds said while explaining the trend. Reynolds also said, "When you become the biggest stock in the world, there's a target on your back from people trying to chip away at your moat, and I think that's part of what we're seeing", via Marketwatch.
Another reason investors are becoming cautious about Nvidia is that large technology companies are designing their own AI chips instead of depending only on Nvidia. Companies such as Alphabet and Amazon are already developing custom AI chips for their own needs.
Apple's smart AI strategy
Apple has also entered this race by signing a deal with Broadcom to develop custom silicon components for its AI products. Nvidia became the most valuable company in the United States on June 25, 2025, when it overtook Microsoft. Microsoft's market value has now fallen to just under $3 trillion, much lower than Nvidia, Apple and Alphabet.
Investors have become less confident about Microsoft's huge AI spending and are questioning whether those investments will generate enough returns, as noted by Marketwatch. Unlike many rivals, Apple has been more careful with AI spending instead of investing billions into building massive AI infrastructure.
Apple has chosen to use outside AI models for some features through its partnership with Google Gemini, instead of building everything itself. According to Reynolds, investors are now focusing more on companies that can add AI features into products people already use, instead of only companies building AI hardware.
Apple's AI plans boost confidence
Apple's stock has risen about 15% this year, while Alphabet shares have gained around 18%, making them the best-performing stocks among the "Magnificent Seven" technology companies. Nvidia shares are still up this year, but only by about 6%, which is lower than the broader stock market's gain of around 9%, according to the report by Marketwatch.
Apple's recent Worldwide Developers Conference (WWDC) became a major turning point because the company finally revealed a clearer AI strategy. Many investors had been waiting nearly two years to understand how Apple would make money from AI.
Wedbush analyst Dan Ives believes Apple's AI plans could create huge value for shareholders. "They basically ripped the Band-Aid off and now we're here and it comes down to monetization," Dan Ives said after Apple's WWDC presentation, via 24/7 Wall St. Ives estimated that AI could add "$75 to $100 per share" to Apple's stock value. He also said AI could generate an extra $100 billion in revenue on top of Apple's existing services business.
Apple's strong business growth
Apple's Services business earned a record $30.976 billion in the second quarter of fiscal 2026, according to Apple figures. Apple now has more than 2.5 billion active devices around the world, giving it a huge customer base for AI services. Apple is rebuilding Siri and allowing AI tools from Gemini and Anthropic to work with its devices.
Morgan Stanley analyst Eric Woodring believes Apple's AI plans could change how investors value the company. Woodring said Apple's WWDC event "has the chance to reframe Apple as an AI winner", according to 24/7 Wall St. Morgan Stanley raised its Apple price target from $330 to $360 after the event and said the stock could even move above $440 in a best-case scenario.
Evercore ISI also increased its Apple target from $330 to $365, saying Apple Intelligence could create new revenue without huge capital spending. Apple reported $111.18 billion in revenue in the second quarter of fiscal 2026, up 17% from a year earlier. iPhone sales reached $56.99 billion, helped by strong demand for the iPhone 17 lineup. Apple also announced a $100 billion share buyback and increased its quarterly dividend by 4% to $0.27 per share.
Risks to Apple's growth
Even before announcing its full AI strategy, Apple had already added about $1.6 trillion to its market value over the past year, a gain of around 52%. Some analysts remain cautious about Apple's AI plans despite the optimism, according to Barclays and UBS. Barclays and UBS said the new AI features are "incremental and unlikely to drive a significant iPhone upgrade cycle."
UBS analyst David Vogt started coverage on Apple with a Neutral rating and a $296 price target, via 24/7 Wall St. Prediction market Polymarket gives Apple only a 1.8% chance of reaching $360 by the end of June, showing traders remain skeptical. Polymarket also gives Apple about a 70% chance of staying at or below $296 over that period.
Apple's shares were trading at a price-to-earnings (P/E) ratio of around 40, meaning investors expect strong future growth and the company has little room for mistakes. While Apple is spending carefully on AI, rivals such as Alphabet, Amazon, Meta, Microsoft and Oracle are investing massive amounts in AI chips, data centres and infrastructure.
Can Apple stay ahead?
Analysts expect these five companies to spend about $4.8 trillion on capital investments between 2026 and 2030, according to Reuters. This heavy spending is putting pressure on their finances, with combined free cash flow expected to fall sharply before recovering later in the decade.
Reuters warned that not every company spending heavily on AI will become a winner, even if investors currently expect strong growth across the sector. The report said investors may be making the "fallacy of composition" by assuming that if AI is good for one company, it will automatically benefit every company in the industry.
Overall, Apple's steady financial performance, disciplined AI strategy, strong services business and growing investor confidence have helped it close in on Alphabet and put it on track to become the world's second-most valuable company.
