On July 28, Apple stock climbed approximately 3% mid-session to reach a historic milestone: a $5 trillion market capitalization. Only one other company, Nvidia, had previously achieved that figure. Days earlier, Apple had already overtaken the GPU leader to reclaim its position as the world's most valuable company. Nvidia has since pulled back to $4.79 trillion.

Apple's latest rally appears tied to a Bloomberg report indicating the iPhone manufacturer is preparing a significant expansion into the smart home sector. The planned product lineup includes a new Siri-powered home hub, an updated Apple TV, and a refreshed HomePod mini, all potentially launching by this fall. The move would mark a more aggressive push into a category where Amazon's Echo and Google's Nest lines have long held leading market positions and where Apple's HomeKit ecosystem has remained a comparatively niche player.

Additionally, Apple's cautious stance on artificial intelligence investment — long criticized by Wall Street — is now drawing praise. With hyperscalers potentially overbuilding data center capacity toward a glut, analysts and money managers are applauding the company's restrained approach. Microsoft, Alphabet, Amazon, and Meta have each announced substantial AI infrastructure build-outs, intensifying investor scrutiny of whether that spending will generate proportional returns.

A valuation unprecedented for Apple

Despite the positive momentum, Apple's recent surge presents investors with a difficult decision. The company has become, by historical standards, extremely expensive.

Apple now stands as the priciest member of the Magnificent Seven, excluding Tesla. Its price-to-earnings ratio hit 41.2 on the day it crossed the $5 trillion threshold — between 37% and 145% higher than Nvidia (30.2), Amazon (27.7), Meta (21.6), and Alphabet (16.8).

Historically, Apple delivered shareholders far more earnings per dollar invested than it does today. From 2013 to 2020, its PE never exceeded 20 and averaged approximately 16. Even post-Covid, the multiple hovered around a median of 28, and as recently as the close of Q1 2024, it sat at 26.4.

From early 2022 through Q1 2024, Apple's EPS and share price both stagnated, keeping its PE below 30. Profits remained essentially flat until mid-2025, then accelerated — rising 25% on a trailing four-quarter basis through Q1 2026. Over that same period, however, the stock surged far more dramatically, doubling from $170 in Q1 2024 to approximately $350 today. That divergence — shares appreciating at roughly four times the pace of profit growth — propelled the PE to its current elevated level above 41.

Buybacks deliver diminishing returns at premium prices

Apple relies heavily on share repurchases to bolster its EPS. In fiscal 2024 and 2025 (both ending September 30), the company spent $185 billion on buybacks, equivalent to 92% of its GAAP net earnings.

When Apple's PE stood at 25, each dollar spent on repurchases lifted EPS by roughly 4 cents, or 4%. At a 41 multiple, that same dollar raises per-share profits by only 2.4 cents and a comparable percentage.

Investors therefore confront two headwinds. First, buybacks will provide significantly less EPS lift than in the past, simply because Apple is repurchasing shares at ultra-premium prices rather than discounted ones. Second, sustaining a PE of 41 is unlikely — the multiple sits nearly 50% above the already elevated S&P 500 average and well beyond where its Mag 7 peers trade.

If Apple's multiple drifts back to 30 over the next five years, the company would need a combined 5% annual contribution from repurchases and earnings growth merely to hold its share price steady at current levels. In other words, at these valuations, Apple must identify a substantial new growth engine to drive its stock higher.

Apple's underlying business remains solid, but its stock has risen far more aggressively than its fundamentals justify. That widening gap is what makes Apple a considerably less attractive investment at current prices.

This story was originally featured on Fortune.com.