Apple nears $4T valuation as investors bet on AI push
What's the story
Apple is on the cusp of a historic $4 trillion stock market valuation, fueled by investor optimism over the company's progress in artificial intelligence (AI).
The move is expected to give a much-needed boost to iPhone sales, which have been slowing down.
Since early November, Apple's shares have witnessed an impressive 16% surge, adding some $500 billion to its market cap.
Market dominance
Apple's market value surpasses major European stock markets
With a valuation of about $3.85 trillion at the last close, Apple now exceeds the combined worth of Germany and Switzerland's top stock markets.
This puts it ahead of tech behemoths such as NVIDIA and Microsoft in the race toward this major milestone.
The recent jump in Apple shares is due to "investor enthusiasm for artificial intelligence and an expectation that it will result in a supercycle of iPhone upgrades," Tom Forte, an analyst at Maxim Group, told CNBC.
AI integration
Apple's AI strategy and market performance
Despite facing flak for its slow pace in detailing an AI strategy, Apple has started integrating OpenAI's ChatGPT into its devices.
The move comes after the company announced in June plans to bring generative AI technology into its app suite.
The recent surge in shares has taken Apple's price-to-earnings ratio to a near three-year high of 33.5, ahead of Microsoft's 31.3 and NVIDIA's 31.7, LSEG data showed.
Revenue expectations
Apple's future revenue projections and market risks
For its fiscal first quarter, Apple expects a "low- to mid-single digits" increase in total revenue.
This slight growth forecast for the holiday shopping season has sparked concerns about the iPhone 16 series' momentum.
However, LSEG data shows that analysts expect iPhone revenues to recover in 2025.
Morgan Stanley analyst Erik Woodring said, "Although near-term iPhone demand is still muted... it is a function of limited Apple Intelligence features and geographic availability."
Stock trends
Apple's stock performance and potential market threats
Despite Apple's shares dipping last Wednesday amid a Wall Street sell-off, investors expect the overall trend of monetary easing to prop up stock markets next year.
"Technology has been regarded by investors as a new form of a defensive sector because of their earnings growth," Sam Stovall of CFRA Research, said.
However, Apple may face retaliatory tariffs if US President-elect Donald Trump goes ahead with his promise to impose tariffs of at least 10% on goods imported from China.