Apple nears $4trn valuation driven by AI successes

• Published On: 24 December 2024 at 21:52

Apple's market valuation is approaching a record $4 trillion, fuelled by investor optimism about the company's artificial intelligence advancements and expectations of an iPhone sales rebound.

Since early November, the company's shares have risen 16%, adding $500 billion to its market capitalisation and solidifying its lead over tech rivals Nvidia and Microsoft in the race to this historic milestone.

Apple's market value is now around $3.85 trillion, surpassing the combined value of Germany and Switzerland's main stock markets.

The recent rally reflects increased investor enthusiasm for Apple's AI efforts, which analysts believe will result in a new wave of iPhone upgrades. "Investor excitement for artificial intelligence and its potential to drive an iPhone supercycle has been a major catalyst," said Maxim Group analyst Tom Forte.

Apple began integrating OpenAI's ChatGPT into its devices in December, building on plans announced in June to incorporate generative AI throughout its app ecosystem. This move is viewed as a strategic effort to catch up with competitors such as Microsoft, Alphabet, Amazon, and Meta Platforms, which have dominated the AI space.

While Apple's AI progress has been criticised for being slow, analysts predict that iPhone revenue will rebound by 2025, thanks to increased availability and improved AI features.

Despite the AI buzz, Apple's forecast for modest revenue growth over the holiday season has raised concerns about the iPhone 16 series' momentum. However, Morgan Stanley analyst Erik Woodring remains optimistic, citing Apple as the brokerage's "top pick" for 2025.

Apple's price-to-earnings ratio is nearing a three-year high of 33.5, compared to Microsoft's 31.3 and Nvidia's 31.7. This valuation premium reflects strong investor confidence, though Warren Buffett's Berkshire Hathaway, a major Apple shareholder, has sold some shares this year due to concerns about stretched valuations.

Apple faces potential risks from trade tensions between the United States and China, as President-elect Donald Trump has proposed new tariffs on Chinese imports. Analysts believe Apple will receive exemptions for key products, similar to those granted during the 2018 tariff disputes.

The company's stock fell briefly last week following the Federal Reserve's forecast of a slower pace of rate cuts next year. However, investors believe that the broader trend of monetary easing will benefit tech stocks such as Apple in 2024.

"Apple's approach to a $4 trillion market cap is a testament to its enduring dominance in the tech sector," said Adam Sarhan, CEO of 50 Park Investments. "This milestone reinforces Apple's position as a market leader and innovator."

As Apple continues to approach this historic valuation, its success demonstrates the tech titan's ability to navigate challenges and capitalise on emerging opportunities in AI and beyond.