GoKawiilApple stock slid significantly downwards in the wake of the WWDC keynote, with some attributing that to disappointment in the company’s AI announcements.
While we disagreed with that analysis, investors do now seem to be welcoming the company’s caution when it comes to AI spending, with the stock rallying 15% since that June low …
The company’s shares slid 4% the day after the keynote, but there were a number of macroeconomic factors affecting a wide range of stocks at the same time, including US strikes against Iran after the downing of an American helicopter.
The stock has rallied even more substantially since then, pushing it back into record territory. Bloomberg believes that AI is a factor in this, albeit somewhat indirectly. It suggests that investors are growing increasingly skeptical about AI spending by other companies and says that Apple’s more cautious approach is now seen as a positive.
The stock’s reversal reflects rising unease about the prospects for heavy spending on AI paying off, with Apple’s decision not to participate in the data center arms race increasingly being viewed as an asset, rather than a liability, even though its AI offerings have repeatedly frustrated investors. “There’s a battle in the market, and right now Apple is benefiting because it isn’t in the storm that the rest of the AI trade is in,” said Mark Bronzo, chief investment strategist at Rye Strategic Partners. “People are concerned about what kind of return hyperscalers could get from their AI spending [and] as a result, investors have gravitated back to Apple as a steady-eddy name without those risks.”
Analysts are said to be unconcerned about the possible impact on demand of the company’s price increases, welcoming the company’s decision to protect its margins. J.P. Morgan said that past price raises have not notably affected demand, and there is optimism about potential revenue from the iPhone Ultra.
Louis Navellier, chief investment officer at Navellier & Associates [said] “Pricing for the folding phone will be so strong that it will offset the memory issue on margins, and I think demand will be so strong that it will really support growth.”
While that may prove optimistic, there does seem a clear view that Apple’s financials are headed in the right direction, with expectations of a 17% increase in net income during the current fiscal year.
Photo by Arturo Añez on Unsplash