Last updated on February 24th, 2025 at 06:51 am
Apple is on the brink of reaching a historic $4 trillion stock market valuation, with shares soaring in recent months thanks to investor optimism about the company’s advancements in artificial intelligence (AI) and efforts to rejuvenate sluggish iPhone sales.
Stock Market Surge and Market Cap Growth
Since early November, Apple’s stock has gone up by almost 16%, adding approximately $500 billion to its market capitalization. The latest close valued Apple at about $3.85 trillion, overtaking the combined value of Germany and Switzerland’s stock markets. This puts Apple at the forefront of the race for a $4 trillion valuation, beating other competitors like Nvidia and Microsoft.
AI-Driven Investor Enthusiasm
Analysts think that this has been driven by the excitement about AI from investors, primarily due to Apple’s new adoption of AI into devices. The company began incorporating OpenAI’s ChatGPT into devices in December and announced in June that it will also add generative AI into its suite of apps. The markets believe that this AI should bring a “supercycle” of iPhone upgrade cycles, driving future growth.
Tom Forte, an analyst at Maxim Group, explained that investors are optimistic about Apple’s AI push, which is expected to revitalize iPhone sales in the long term. The company had previously faced criticism for being slow to develop its AI strategy compared to competitors like Microsoft, Alphabet, Amazon, and Meta Platforms, which have taken leadership roles in the emerging technology.
iPhone Sales Outlook and Revenue Growth
Despite the muted iPhone demand over the near term, analysts do expect a rebound in sales of iPhones in 2025. The company also forecasted modest growth for the first fiscal quarter, with overall revenue expected to increase in the low to mid-single digits during the holiday season. Slow sale of iPhones is primarily blamed on limited AI features and geographic availability, which should expand, thus enhancing the future demand.
Morgan Stanley analyst Erik Woodring reiterated that Apple is its “top pick” going into 2025 as the company continues to build out its AI capabilities.
Valuation and Market Sentiment
The rise in Apple’s stock has forced it to reach a near three-year high of 33.5 in its price-to-earnings ratio with Microsoft at 31.3, and Nvidia at 31.7. According to Rational Dynamic Brands Fund analyst Eric Clark some analysts believe that in subsequent years, the attractiveness for Apple’s stock will see a rise when AI enrichments start showing its fruition.
While Warren Buffett’s Berkshire Hathaway has sold some of its Apple shares this year on concerns about stretched valuations, market sentiment around Apple remains strong due to its consistent growth in earnings, especially in the technology sector.
Risks and Tariff Concerns
Retaliation against the US means Apple might have to deal with retaliatory tariffs if the new US President-elect, Donald Trump, carries through his threat of imposing tariffs on all imports from China. Analysts, including Morgan Stanley’s Woodring, think Apple will mostly get exclusions on essential products such as iPhones, Macs, and iPads, like in 2018 during the initial round of tariffs imposed by China.
Market Outlook and Future Growth
Despite the recent fall in Apple’s shares due to a Wall Street selloff, analysts remain positive about the long-term prospects of the company. Stock markets, especially the technology sector, will be supported next year due to the Federal Reserve’s monetary policy, which will provide strong earnings growth. Sam Stovall, Chief Investment Strategist at CFRA Research said while sectors such as consumer discretionary and financials would suffer from the slower rate cuts, technology stocks will be more than just fine.
Apple’s drive for a $4 trillion valuation means that the company remains top in the tech sector in terms of valuation. Moreover, AI developments are key in these developments that have been keeping it on top and continuously scaling up. Investors are therefore looking towards its future success with new developments in AI capabilities going forward.