Apple Stock Hits $3 Trillion Valuation As AI iPhone Hype Builds

Topline

Apple notched its highest share price this year thanks to Wall Street fanfare about the Silicon Valley titan’s artificial intelligence potential ahead of its Worldwide Developers Conference next week, as investors eagerly await what some paint as the next major event to drive slumping iPhone sales.

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Apple CEO Tim Cook

AFP via Getty Images

Key Facts

Apple’s stock rose as much as 1% to $196.42 in Wednesday trading, notching their highest share price since mid-December and crossing a $3 trillion market capitalization for the first time since January (the discrepancy is due to Apple’s billions of dollars worth of share buybacks).

Apple has now officially wiped out its 15% drawdown from January to April as the market sold Apple stock and bought others seen as more in-vogue AI bets.

JPMorgan analyst Samik Chatterjee, who was among a chorus of analysts who hyped Apple’s annual event in notes to clients this week and thus boosted the share price, said the conference starting Monday will “highlight whether Apple has successfully caught up with the rest of the industry, despite a perceived delay in relation to investments in AI.”

Chatterjee said he expects the WWDC event will “successfully catalyze an upgrade cycle” for the iPhone, a much-needed tailwind for Apple as iPhone sales are expected to be the weakest since 2020 during the current quarter, according to consensus analyst forecasts compiled by FactSet.

Chatterjee added he anticipates the upgrade cycle, in which the estimated 1.5 billion iPhone users trade in their existing smartphones for the newest model, will begin this year before accelerating in 2025 as macroeconomic conditions are likely to improve and consumers grow hungrier for AI-heavy smartphones.

The top “watchpoint” at WWDC will be whether Apple reveals it will be ready to launch generative AI across iPhone-specific applications like Siri and iMessage by September, according to Chatterjee.

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Crucial Quote

If WWDC impacts Apple stock given the AI hype. “Historically, WWDC is not a material stock catalyst for Apple…we think this year is different as Apple formally enters the Gen AI race,” prognosticated Morgan Stanley analysts led by Erik Woodring.

What To Watch For

If WWDC impacts Apple stock given the AI hype. “Historically, WWDC is not a material stock catalyst for Apple…we think this year is different as Apple formally enters the Gen AI race,” prognosticated Morgan Stanley analysts led by Erik Woodring.

Key Background

The last year has been an unusually cool stretch for Apple investors, as the stock’s 7% return is worse than the S&P 500’s 25% and rival Microsoft’s 23% return. Microsoft, which overtook Apple as the world’s most valuable company earlier this year, has more tangibly translated the intense interest in AI into earnings growth than Apple, with its first-quarter net income 20% higher than the same period in 2023, far better than Apple’s -2% bottom line growth. Apple has been fairly quiet in discussing its AI offerings to the public, though its chief executive Tim Cook said in February that the company has put a “tremendous amount of time and effort” into generative AI. Other than agita about Apple’s unclear path to monetize AI, the largest point of investor frustration has been a decline in its key China business, with sales in the region expected to come in 7% lower than 2022’s record $74.2 billion, according to FactSet.

Further Reading

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