- Apple is up about 27% this year, significantly outpacing the S&P 500's 13% gain, as it has risen on 2 of every 3 days when chip stocks fell, becoming Wall Street's AI hedge.
- In July, Apple's correlation with the chip index turned negative and reached its lowest level on record in September.
- Over the past month, Apple gained about 3% while the iShares Semiconductor ETF tumbled about 17%.
- On Friday, chip stocks experienced their worst day since June, yet Apple still fell about 1%.
- Over the past four reported quarters, Amazon, Alphabet, Microsoft, and Meta collectively spent over $600 billion on capital expenditures, while Apple spent about $10 billion.
- Bank of America's Wamsi Mohan estimates that these capital expenditures will negatively impact iPhone profit margins, suggesting that Wall Street's margin forecasts are too high for the upcoming year.
- State races and local referendums in Texas, Ohio, and Georgia pose risks to the AI trade as their outcomes could significantly impact the market.
Apple's stock has gained 27% this year, outpacing the S&P 500's 13% increase. This remarkable performance is highlighted by its resilience during chip selloff days, where it rose on 30 out of 46 days when the Philadelphia Semiconductor Index fell by 2% or more, a significant improvement from previous years.126
Historically, Apple only rose on about 1 in 6 of those days from 1994 through last year. This year marks a notable shift, with Apple's correlation with the chip index turning negative in July and reaching its lowest level on record in September. Over the past month, Apple gained 3% while the iShares Semiconductor ETF tumbled about 17%.34
Despite its strong performance, analysts warn of potential risks. Upcoming state races and referendums in Texas, Ohio, and Georgia could disrupt the AI trade, which is crucial for Apple's future growth. Over the past four quarters, major tech companies like Amazon, Alphabet, Microsoft, and Meta have invested over $600 billion in long-lasting assets to build out AI, while Apple has spent only $10 billion. Bank of America's Wamsi Mohan cautioned that rising costs could impact iPhone profit margins, suggesting that Wall Street's margin forecasts may be too optimistic heading into earnings.78
As the market watches closely, Apple's upcoming December quarter margins will be critical in determining whether it can maintain its status as Wall Street's favorite AI hedge amidst these challenges.
“Apple's negative correlation with the chip index, which set a record low in September, marks a stark shift from its historical pattern of falling with chip stocks. Meanwhile, Apple's capex of about $10 billion pales against the $600 billion spent by Amazon, Alphabet, Microsoft, and Meta, raising margin concerns flagged by BofA's Wamsi Mohan.”
WSJ
Yahoo Finance
