How Higher Treasury Yields Crush Stock Valuations: Apple and Nvidia Examples

AI-generated source summary

The analysis compares the price-to-earnings (P/E) ratios and growth expectations of Apple (AAPL) and Nvidia (NVDA). AAPL currently trades at a P/E of approximately 33.7, with an estimated year-end forecast of 8.82, resulting in a forward P/E of about 38x. The analysis suggests that a 6% decrease in AAPL's price would bring its P/E to roughly 31.7, while a decrease to $206 would represent a 6% decline. A further drop to $206, or an 8.4% decrease from current levels, would result in a P/E of 206/9.37=22. The speaker suggests that if AAPL's P/E were to fall to 24x, the stock price would be around $225. In contrast, NVDA trades at a current P/E of approximately 38x, with forward earnings of 9.37, leading to a forward P/E of around 24x. The analysis implies that NVDA's current valuation is more attractive with a P/E of 24x, compared to AAPL's 38x forward P/E. The speaker calculates that a 10% decrease in NVDA's price would bring its P/E to 5%, and a further decrease to $206 represents an 8.4% drop from current levels. The key takeaway is that companies with lower P/E ratios are generally more attractive, especially if they demonstrate strong growth potential, which the analysis implies NVDA has over AAPL.

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