(Bloomberg) -- Shares of Apple Inc. were battered earlier this year as the iPhone maker faced repeated complaints about its lack of an artificial intelligence strategy. But as the AI trade faces increasing scrutiny, that hesitance has gone from a weakness to a strength — and it’s showing up in the stock market.
Through the first six months of 2025, Apple was the second-worst performer among the Magnificent Seven tech giants, as its shares tumbled 18% through the end of June. That has reversed since then, with the stock soaring 35%, while AI darlings like Meta Platforms Inc. and Microsoft Corp. slid into the red and even Nvidia Corp. underperformed. The S&P 500 Index rose 10% in that time, and the tech-heavy Nasdaq 100 Index gained 13%.
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“It is remarkable how they have kept their heads and are in control of spending, when all of their peers have gone the other direction,” said John Barr, portfolio manager of the Needham Aggressive Growth Fund, which owns Apple shares.
As a result, Apple now has a $4.1 trillion market capitalization and the second biggest weight in the S&P 500, leaping over Microsoft and closing in on Nvidia. The shift reflects the market’s questioning of the hundreds of billions of dollars Big Tech firms are throwing at AI development, as well as Apple’s positioning to eventually benefit when the technology is ready for mass use.
“While they most certainly will incorporate more AI into the phones over time, Apple has avoided the AI arms race and the massive capex that accompanies it,” said Bill Stone, chief investment officer at Glenview Trust Company, who owns the stock and views it as “a bit of an anti-AI holding.”
Of course, the rally has made Apple’s stock pricier than it has been in a long time. The shares are trading for around 33 times expected earnings over the next 12 months, a level they’ve only hit a few times in the past 15 years, with a high of 35 in September 2020. The stock’s average multiple over that time is less than 19 times. Apple is now the second most expensive stock in the Bloomberg Magnificent Seven Index, trailing only Tesla Inc.’s whopping valuation of 203 times forward earnings. Apple’s shares climbed about 0.5% in early Tuesday trading.
“It’s really hard to see how the stock can continue to compound value at a level that makes this a compelling entry point,” said Craig Moffett, co-founder of research firm MoffettNathanson. “The obvious question is, are investors overpaying for Apple’s defensiveness? We think so.”