Despite an earnings beat and strong iPhone sales, investors focused on Apple’s (AAPL) weaknesses, slowing services growth, and projected lower margins as the stock fell 2% on Tuesday.
But the iPhone maker may have also been cushioned by its unique position among the tech giants — and the massive sell-off they had just a few trading days ago.
While everyone else has been spending lavishly on the AI build-out, Apple has been biding its time, as if content to let its competitors simply do their business on its hardware. To some, this is the “wrong” end of the AI trade.
But in the jittery moments of AI angst, when that lavish spending’s meaning shifts from “potential” to “risk,” it sends investors running from Google, Amazon, and Microsoft into the arms of Cupertino, safe from the risky AI bets.
The reason for Apple’s position as “AI hedge” is perhaps best illustrated by our colleague Jared’s Chart of the Day, entitled, “Apple just made twice as much free cash as Microsoft, Meta, Alphabet, and Amazon combined.”
That pretty much sums it up.
Apple is still spending more on the AI ramp-up of its flagship assistant, Siri. But its cash pile and ability to absorb price hikes from higher memory costs have also positioned the company to take market share.
As HSBC analyst Nicolas Cote-Colisson wrote in a note on Tuesday, “Apple is in a better position than many of its tech peers.”
All of this has likely helped cushion the ticker’s fall. It’s possible that without the tech pullback, Apple stock would have experienced a more extreme swing downward. What doesn’t require speculation, though, is the company’s relative financial strength.
As Cote-Colisson put it, “Apple keeps delivering record operational and financial results quarter after quarter.” The company managed to pull off a successful price hike, and offers a dense product lineup.
For Apple bulls or investors looking to hedge their AI positions, a squeezed profit margin is still a powerful hand to play, especially as every other tech company is trying to figure out how to successfully monetize AI.
Perhaps a slightly less profitable Apple is still a safe bet against a host of companies trying to ad-lib their AI business models.
Follow Hamza Shaban on X @hshaban.