Apple is approaching an unprecedented $4 trillion stock market valuation, driven by investor enthusiasm for the company’s much-anticipated advancements in artificial intelligence (AI), aimed at revitalizing stagnant iPhone sales. With its shares surging roughly 16% since early November—boosting its market capitalization by about $500 billion—Apple has outpaced competitors Nvidia and Microsoft in the race toward this remarkable milestone.
The rise reflects “investor enthusiasm for AI and an expectation that this will lead to a supercycle of iPhone upgrades,” Tom Forte, an analyst at Maxim Group who rates the stock as a hold, told CNBC. He says that Apple has already started incorporating some of the technology from generative AI leader OpenAI into its devices, which will help drive upbeat near-term iPhone demand.
A robust earnings season this year and an expected boost from the launch of new Apple TV box set-top boxes have also helped fuel expectations that consumers will spend more freely on discretionary items like phones, computers, and tablets. This could also lift revenue from the services business, which has been the source of strength for the tech giant in recent years, as many people have shifted to using mobile data plans instead of expensive bundled phone and plan bundles.
But the rush toward trillion-dollar tech valuations has raised concerns about overvaluation, with some investors worried that it’s reminiscent of the Nasdaq froth of the 1990s and early 2000s, which eventually led to a painful crash. Even Warren Buffett’s Berkshire Hathaway has trimmed its stake in Apple this year as it rebalances its portfolio amid concern about stretched valuations.
The race to the milestone has also highlighted the importance of AI in bolstering consumer spending as more businesses adopt the technology to serve customers better, analyze data, and improve their products. For example, companies have used machine learning to automate tasks such as image recognition and text translation, which saves workers time and effort. AI is also transforming the automotive industry, with carmakers now using it to optimize performance and driver safety.
It’s too early to say which of the three companies will hit the mark first, but Apple may be closer to the milestone than Nvidia and Microsoft. Deepwater Asset Management’s Gene Munster thinks that if Apple can “show the world a successful iPhone 16 with a solid holiday season this month and strong services growth, AAPL will be a $4 trillion stock by 2024,” he said. However, he noted that Nvidia and Microsoft look more attractively priced in today’s market, and they may have an enormous runway to get there. Nvidia’s price multiple is currently near the high end of the historical range, and Microsoft’s could expand as investors recognize its value in a post-PC era. All of them are worth watching, however, as they continue to gain traction in the quest for the next trillion.
