((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Shashwat Chauhan and Medha Singh
Apple AAPL.O is closing in on a historic $4 trillion market valuation, led by investors who welcome the company's progress in long-awaited AI enhancements to revive declining iPhone sales.
The company edged out Nvidia NVDA.O and Microsoft MSFT.O in the race for this monumental milestone, thanks to a roughly 16% jump in its shares since early November that added some $500 billion to its market capitalization .
The latest rise in Apple shares reflects “investor enthusiasm for artificial intelligence and the expectation that it will translate into a supercycle of iPhone upgrades,” said Tom Forte, an analyst at Maxim Group, which has a “keep” rating.
Valued at around $3.85 trillion at last close, Apple dwarfs the combined value of Germany's major stock markets .GDAXI and Switzerland's .SSMI.
The Silicon Valley company, driven by the iPhone “supercycles”, was the first American company to cross the trillion-dollar milestone.
In recent years, the company has been criticized for being slow to define its artificial intelligence strategy, as Microsoft, Alphabet, Amazon and Meta Platforms have moved ahead to dominate the emerging technology.
Shares of Nvidia, the biggest beneficiary of artificial intelligence, have surged more than 800% over the past two years, while Apple shares have nearly doubled over the same period.
Apple began integrating OpenAI's ChatGPT into its devices in December, after revealing plans in June to integrate the generative AI technology across all of its apps.
The company expects overall revenue to increase “by a low to mid percentage” in its fiscal first quarter – a modest growth forecast for the holiday season – this which raises questions about the momentum of the iPhone 16 series.
However, LSEG data shows that analysts expect iPhone sales to rebound in 2025.
“While near-term iPhone demand is still low, it is a function of limited Apple Intelligence features and geographic availability, and as both of these become more widespread, they will help improve iPhone demand,” Morgan Stanley analyst Erik Woodring said in a note, reaffirming that Apple is the brokerage’s “top pick” through 2025.
The recent surge in stocks has pushed Apple's price-to-earnings ratio to its highest level in almost three years, 33.5, compared to 31.3 for Microsoft and 31.7 for Nvidia, according to LSEG data .
Warren Buffett's Berkshire Hathaway BRKa.N has sold shares of Apple – its largest holding – this year, as the conglomerate has generally pulled back from stocks amid concerns about inflated valuations.
“I think three years from now, the stock won't look as expensive as it does today,” said Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, which owns Apple shares.
Apple faces the risk of retaliatory tariffs if U.S. President-elect Donald Trump follows through on his promise to impose tariffs of at least 10% on products from China.
“We believe it is likely that Apple will obtain exclusions on products such as the iPhone, Mac and iPad, similar to China's first round of tariffs in 2018,” Woodring said.
Apple shares fell last Wednesday amid a Wall Street selloff after the Federal Reserve forecast a slower pace of rate cuts next year, but investors expect the trend General monetary easing supports stock markets next year.
“Investors are viewing technology as a new form of defensive sector because of their earnings growth,” said Sam Stovall, head of investment strategy at CFRA Research.
The Fed's action “could end up having a greater impact on other cyclical sectors such as consumer discretionary and financial services, and less on technology”
“Apple's approach to $4 trillion in market capitalization is a testament to its enduring dominance in the technology sector. This milestone reinforces Apple's position as a market leader and innovator,” said Adam Sarhan, Director general of 50 Park Investments.
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