Key Points

Nvidia trades near 22 times forward earnings while Coca-Cola sits around 26 times.
Nvidia revenue climbed 85 percent year over year in the latest quarter.
Coca-Cola reached a fresh record close as Nvidia remains about 18 percent under its 52-week peak.
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Consider this surprising development. Nvidia (NASDAQ: NVDA), currently the largest company by market value, now carries a lower valuation than Coca-Cola (NYSE: KO) when measured by the key forward earnings yardstick. Nvidia changes hands near 22 times projected profits. Coca-Cola commands about 26 times.

The stocks reached this unusual spot through contrasting paths. Coca-Cola ended Thursday at 84.14 dollars, marking an all-time peak after advancing roughly 20 percent during 2026. Nvidia lingers around 18 percent beneath its yearly high following investor doubts over the pace of artificial intelligence investment. The gap widened further this week as Coca-Cola surged 3.5 percent to its new high while Nvidia eased.

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So which valuation holds the error?

Image source: Nvidia.

How the math reversed

The forward price-to-earnings ratio values a share against expected earnings per share for the coming twelve months. This benchmark allows fair comparison across dissimilar firms by focusing on anticipated profit power.

By this yardstick the largest company has turned into the more affordable name. Nvidia forward multiple slipped into the low twenties once earnings estimates rose faster than the share price. Coca-Cola forward multiple advanced into the mid-twenties once its price outpaced its consistent profit expansion. On reported results the figures sit closer together, Nvidia near thirty times and Coca-Cola near twenty-six, yet the forward difference stands out because Nvidia profits continue expanding at exceptional speed.

Growth alone fails to account for the shift. Nvidia revenue in its fiscal first quarter ended April 26 2026 jumped 85 percent from a year earlier to 81.6 billion dollars while data center sales rose 92 percent to 75.2 billion dollars. Management projected roughly 91 billion dollars for the current quarter.

Coca-Cola enjoys solid results by its measures. Net sales advanced 12 percent to 12.5 billion dollars in the first quarter and organic revenue grew 10 percent, aided partly by six extra days, while comparable earnings per share increased 18 percent. Still the annual forecast points to 4 to 5 percent organic revenue expansion.

Thus a firm that posted 85 percent revenue growth costs less per expected profit dollar than one targeting mid-single-digit organic gains. That is the reversal.

What each valuation implies

Markets seldom grant discounts without cause, and Nvidia faces a clear concern: AI infrastructure outlays may prove cyclical, placing current profits near a peak or plateau. Should major cloud operators pause to absorb purchased capacity or should rivals intensify and pressure Nvidia margins, profit growth could decelerate sharply or reverse.

Coca-Cola valuation premium reflects the reverse narrative. Its earnings rank among the steadiest available, and with investors favoring reliable dividend payers this year, stability fetches a higher price. Buyers at the record level do not anticipate 85 percent expansion. They simply count on consistency.

Both valuations can be defended. Yet which choice offers more value?

For Coca-Cola to support a mid-twenties forward multiple its mid-single-digit revenue pace must continue without end. Moreover investors must keep favoring safety and stability. Otherwise shares could decline even if growth holds steady. Past patterns show that premiums paid for defensiveness carry their own risk. Once the caution driving buyers into stable names eases the premium can fade.

For Nvidia to support a low-twenties multiple its revenue and profit expansion could slow markedly in coming years and the stock would still align with that valuation. Meanwhile guidance for roughly 91 billion dollars this quarter indicates demand remains firm. The longer-term question centers on whether AI spending keeps compounding into 2027 and beyond.

If either valuation misprices reality the Nvidia figure appears more questionable. A leading firm expanding this rapidly seldom trades at a discount to a mature consumer staple, and the gap stems largely from fears of a slowdown that current guidance does not yet indicate.

The cautious view on Nvidia, that growth could slow unexpectedly, deserves attention. Chipmakers have long faced cycles and this surge will eventually moderate. At current levels however that possibility may already be reflected in the price.

That said I would not exit Coca-Cola to acquire Nvidia. The holdings serve separate roles. For fresh capital comparing the two today the growth opportunity trades at a discount while safety carries a premium. I would select the discounted option.

Should you buy stock in Nvidia right now?

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Stock Advisor returns as of July 4 2026.

Daniel Sparks holds no position in any stocks mentioned. The Motley Fool maintains positions in and recommends Nvidia. The Motley Fool maintains a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq Inc.