We recently published a list of Top 10 AI Stocks Buzzing on Latest News. In this article, we are going to take a look at where Apple Inc (NASDAQ:AAPL) stands against other top AI stocks buzzing on latest news.
Investors are continuing to assess the impact of new LLMs in the AI industry. X. Eyeé, CEO of AI consulting firm Malo Santo and senior policy advisor at the Goldman School of Public Policy at UC Berkeley, said in a recent program on CNBC that the DeepSeek breakthrough in China has changed the dynamics of the AI race. She believes AI development is no longer limited to the companies with the “largest pockets.”
“I mean, the world has long looked to the United States to be the leader in artificial intelligence, but these recent model releases from China have demonstrated its ability to leapfrog and catch up with us tech giants and achieve groundbreaking results without the luxury of advanced hardware, which is ultimately challenging everything that we thought was necessary for innovation in the AI space. See, what DeepSeek represents is that AI innovation isn’t necessarily driven by the companies with the largest pockets or the fanciest hardware, but that collaborative development approaches can actually end up providing market-leading technologies.”
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For this article, we picked 10 AI stocks making the biggest moves these days. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Kim Forrest, Bokeh Capital Partners CIO, said while talking to Schwab Network before Apple’s earnings that she was expecting a weakness in iPhone numbers because people are not seeing a reason to upgrade. Apple Inc (NASDAQ:AAPL) report later proved that iPhone sales were in fact downbeat in the quarter. But let’s first see what the analyst said:
“I’m looking for weakness, actually, and it’s for the reasons that you’ve said. First of all, it’s a great product. I got converted, I don’t know, in 2019 to the iPhone, and it is a great product, but it’s really lasting. I have not upgraded since 2019, nor am I always kind of like a laggard on personal use technology, even though I was a technologist. Let’s just not delve into that too early in the morning. Regardless, I am not alone. There’s not a whole lot of reasons for me to want to upgrade, and as you point out, yeah, the promise of AI is there, but the delivery isn’t there yet. I think the more the great body of people are going to want to know why they need to upgrade and go through that cycle. So I agree that this is going to be a flattish quarter, and expectations will be met, but it’s not going to be exciting. Here’s the thing, though: if you are a holder of Apple Inc (NASDAQ:AAPL), this isn’t really an excuse to sell it necessarily, because, as I said, there’s not a whole lot of competition. It’s not like people are buying other phones instead of Apple Inc (NASDAQ:AAPL). It’s just that the cycle, the renewal cycle, the upgrade cycle, has been extended.”
Apple’s results were helped by Services revenue in the latest quarter, but the key challenges haunting the company remain as they were. Many analysts believe just a few AI apps would not be enough to trigger a broader upgrade cycle for iPhone. Apple is dealing with currency headwinds as the stronger US dollar is expected to reduce top-line growth by 2.5% next quarter. For Q2 FY2025, management expects overall revenue to grow in the low to mid-single digits. Apple’s stock is trading at a premium valuation, with a price-to-earnings ratio of 39-40x, a price-to-free-cash-flow ratio of 33-34x, and a PEG ratio exceeding 3x. Upcoming quarters would be difficult for Apple and its current valuation is not justified.
Greenlight Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“We continue to be concerned about the overall valuation of the market and have maintained a lower-than-average net market exposure. In fact, our daily correlation to the S&P 500 last year was 0.01. Cyclically and interest rate adjusted valuations are as high as we can remember.
A look at a prior favorite company of ours, Apple Inc. (NASDAQ:AAPL), shows that the stock at times sported a single digit P/E ratio and achieved 19.2% compounded revenue growth during the eight years we owned it. The last couple of years AAPL has had no revenue growth, but the P/E multiple has expanded from 22x to 37x. In this environment, we can’t say the multiple won’t expand to 45x a year from now. It might. But we don’t see why it should or what the investment appeal is at this valuation.”
Overall, AAPL ranks 5th on our list of top AI stocks buzzing on latest news. While we acknowledge the potential of AAPL, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
