3. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Daniel Newman from The Futurum Group was recently asked on Schwab Network his thoughts on Apple Inc (NASDAQ:AAPL). The analyst explained why he was skeptical about the stock.
“I’m still skeptical about Apple Inc (NASDAQ:AAPL) because of where the valuation sits. I mean, this is one of the most consequential companies in the world. It has a massive install base, but I just don’t think it’s quite gotten its AI rollout correct. That could be artificial intelligence or app intelligence. The early readouts are low use and not super great value.
The fact that it’s connecting back to OpenAI says the company really hasn’t executed yet in terms of figuring out its plan for language models and video models. We’ve also seen this kind of super cycle that was promised to the market for smartphones and next-generation PCs sputter a bit.
I mean, you’d think even just one year between CES events—in 2024, it was supposed to be the year of the AI PC and the AI smartphone. We heard “super cycle” over and over again, and we’ve seen nothing, if not just a blip of an uptick.”
Apple Inc (NASDAQ:AAPL) is desperately in need of new catalysts. The company’s revenue in China fell 8% in fiscal year 2024, following a 2% decline the previous year. The Chinese market accounts for about 15% of Apple’s total revenue, so this downtrend cannot be ignored.
Investors had hopes from the Wearables, Home, and Accessories segment, but so far its performance has been weak. Vision Pro faces tough competition from Meta’s $500 Quest and the more affordable Quest 3S, making it hard to justify its $3,500 price tag. The failure of Apple’s HomePod, unable to compete with Amazon’s and Google’s lower-priced offerings, further highlights the challenges in this market.
Apple’s iPhone 16 has not shown promising growth prospects yet and investors are still in a wait-and-see mode on the AI platform.
CDT Capital Management stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“The crowd. While this evolution in AI is going to change the world, market expectations for the technology have become unhinged. The crowd, which is more like an exuberant mob, anointed the Mag 7 with spectacular, nonsensical valuations based on the premise that AI will be an amazing, money-printing growth engine for these companies – and the truth is it likely will be. The problem is that the math just isn’t mathing.
Let me explain what I mean by picking on the world’s most valuable stock, Apple Inc. (NASDAQ:AAPL). For background, Apple does not have a robust homegrown AI platform, nor does it have a plan to meaningfully monetize AI from Apple users. Right now, from our perspective, Apple’s, Apple Intelligence strategy of implementing third-party AI tools to stay competitive will likely be more of a cost of doing business than an avenue for sales and yet in 2024, the stock soared +33% based on the AI dream as exemplified by the quote below.
