Apple
Setting aside Nvidia’s mind-bending run, the Big Tech stock that has performed the best since the pandemic hit is — surprisingly, at least to me — Apple. The stock has also done very well in the latest leg of the equity rally, which began in April, as worries about resurgent inflation began to fade and rate cuts came into view:
Apple outperformed Google, Microsoft and Meta while the AI rally was hot; it got a big boost from the announcement of its partnership with OpenAI back in June. And it has increased its lead while Nvidia has plateaued and fallen.
Unhedged noted two years ago that Apple rallies with tech but doesn’t fall in tech corrections. So this phenomenon is not new. But it has only become more remarkable, because over those two years, Apple’s growth, already the slowest of the Big Tech companies, has only gotten slower:
The pattern, while interrupted by a burst of pandemic demand, is clear: growth is slowing, with each new product cycle providing less of a boost. How much of this is down to the law of large numbers and how much to a slowing rate of innovation is open for debate. But it’s a fact, and not even sellside analysts can imagine a future in which revenue grows in the double digits.
Apple’s plan to reignite growth involves more AI, as yesterday’s iPhone 16 event emphasised. I have no idea whether this will work, but it does little to solve the fundamental puzzle: why does Apple consistently outperform its peers through market cycles while growing more slowly than they do? Clearly this has something to do with the stickiness of Apple’s revenues, which are increasingly derived from services. But as the stock’s price/earnings ratio approaches its 2021 high and touches par with Microsoft, one starts to wonder how long this can go on:
