Apple Nears $4 Trillion Valuation as Investors Capitalize on AI Growth – One America News Network
December 23, 2024 – 5:42 AM PST
(Reuters) – Apple (AAPL.O) is nearing a landmark $4 trillion market capitalization, fueled by investor enthusiasm around the company’s anticipated artificial intelligence innovations aimed at reviving tepid iPhone sales.
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Apple has surged ahead of competitors like Nvidia (NVDA.O) and Microsoft (MSFT.O) in this race, owing to a roughly 16% increase in stock price since early November, which has contributed around $500 billion to its valuation.
Tom Forte, an analyst at Maxim Group who maintains a “hold” rating, noted that the latest uptick in Apple’s shares reflects “investor excitement for artificial intelligence and the belief it will spark a supercycle of iPhone upgrades.”
Currently valued at approximately $3.85 trillion, Apple outstrips the combined market capitalization of Germany’s (.GDAXI) and Switzerland’s (.SSMI) leading stock exchanges.
The Silicon Valley giant, known for its iPhone supercycles, became the first American company to reach previous trillion-dollar valuation milestones.
Recently, Apple has faced criticism for its slow approach to establishing an AI strategy, while Microsoft, Alphabet, Amazon, and Meta Platforms have more rapidly advanced in this burgeoning field.
Nvidia, the largest beneficiary of the AI boom, has seen its shares skyrocket more than 800% over the past two years, in contrast to Apple’s nearly 100% increase in the same timeframe.
Earlier this month, Apple began integrating OpenAI’s ChatGPT into its devices following its announcement in June about plans to embed generative AI technology across its applications.
The company is forecasting a revenue increase in the “low- to mid-single digits” for its fiscal first quarter, a modest prediction for the holiday season, which raises questions about the upcoming iPhone 16 series’s performance.
However, analysts at LSEG predict a rebound in iPhone revenue by 2025.
“While current iPhone demand is subdued … it is primarily due to limited Apple Intelligence features and availability, and as these expand, we expect to see an uplift in iPhone demand,” stated Morgan Stanley analyst Erik Woodring, reaffirming Apple as the firm’s “top pick” as it heads into 2025.
Apple’s recent stock surge has brought its price-to-earnings ratio to a near three-year high of 33.5, compared with Microsoft’s 31.3 and Nvidia’s 31.7, according to LSEG data.
This year, Warren Buffett’s Berkshire Hathaway (BRKa.N) has sold off shares of Apple, its largest investment, as the conglomerate has generally pulled back from stocks due to concerns over inflated valuations.
“I anticipate that in three years, the stock will not appear as pricey as it does now,” remarked Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, which includes Apple in its holdings.
There are also concerns about retaliatory tariffs as U.S. President-elect Donald Trump intends to impose tariffs of at least 10% on goods imported from China.
“We believe Apple is likely to receive exemptions for products like the iPhone, Mac, and iPad, akin to the initial round of tariffs from China in 2018,” Woodring noted.
Last Wednesday, Apple’s shares dropped amid a broader selloff on Wall Street after the Federal Reserve projected a slower pace of interest rate cuts for the upcoming year; however, investors remain optimistic that the general trend of monetary easing will bolster stock markets in the coming year.
“Technology has been perceived by investors as a new defensive sector due to continuing earnings growth,” commented CFRA Research’s chief investment strategist, Sam Stovall.
The Federal Reserve’s decisions “may impact cyclical sectors like consumer discretionary and financials more than technology.”
“Apple’s approach to reaching a $4 trillion market cap underscores its sustained leadership in the technology industry. This achievement reaffirms Apple’s status as a market influencer and pioneer,” stated Adam Sarhan, CEO of 50 Park Investments.
Reporting by Shashwat Chauhan and Medha Singh in Bengaluru; additional reporting by Aditya Soni and Purvi Agarwal; Editing by Sriraj Kalluvila
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