Despite higher profits and strong iPhone sales, investors focused on Apple’s ( AAPL ) weaknesses, slowing services growth and forecast falling margins, with the stock falling 2% on Tuesday.
But the iPhone maker may also have been cushioned by its unique position among tech giants — and by the massive selloff it experienced a few trading days ago.
While everyone else has been spending huge amounts on AI development, Apple has been biding its time, as if content to simply let its competitors do their business on its hardware. For some, this is the “bad” end of the AI business.
But in moments of AI anxiety, when the meaning of this lavish spending shifts from “potential” to “risk,” it sends investors fleeing Google, Amazon, and Microsoft into the arms of Cupertino, safe from risky AI bets.
The reason for Apple’s position as an “AI hedge” is perhaps best illustrated by our colleague Jared’s chart of the day, titled “Apple Just Made Twice as Much Free Money as Microsoft, Meta, Alphabet, and Amazon Combined.”
That pretty much sums it up.
Apple is spending more and more to develop the AI of its flagship assistant, Siri. But its cash flow and ability to absorb price increases due to higher memory costs have also allowed the company to gain market share.
As HSBC analyst Nicolas Côté-Colisson wrote, “Apple is in a better position than many of its technology peers.”
All of this likely helped cushion the ticker’s fall. It’s possible that without the technology setback, Apple stock would have seen a more extreme decline. What doesn’t require speculation, however, is the company’s relative financial strength.
As Côté-Colisson says, “Apple continues to generate record operational and financial results quarter after quarter.” The company has successfully raised its prices and offers a dense product range.
For Apple bulls or investors looking to hedge their AI positions, a reduced profit margin remains a powerful asset to play, especially as every other tech company tries to find a way to successfully monetize AI.
Perhaps a slightly less profitable Apple remains a safe bet against a host of companies trying to scale their AI business models.
Follow Hamza Shaban on @hshaban.
Gn bussni
