We recently published a list of 10 AI Stocks Analysts Are Focusing On These Days. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other AI stocks analysts are focusing on these days.
Dennis Unkovic, a partner at Meyer, Unkovic & Scott, said in a latest program on CNBC that DeepSeek is the result of President Xi Jinping’s policy of prioritizing AI and tech research over the past few years. The analyst believes DeepSeek is the response of China to American tariffs.
“Today, if you take technology, maybe two-thirds of it is Western and one-third of it is Chinese. It’s clear to me that what the Chinese want to do is move the needle so they’re at least 50/50. What this means…. in the future, is you’re going to have a country that’s going to have to say, what kind of technology do I want to adopt? Is it technology from the West, or is it technology from China? So I think this is a strong opening salvo of the Chinese to the U.S., saying, if you want to put tariffs on me, this is the way we’re going to go.”
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For this article, we picked 10 AI stocks that are trending amid the DeepSeek-triggered selloff that rocked the markets. 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).
A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Dan Niles, Niles Investment Management founder & portfolio manager, predicted in a latest program on CNBC that Apple Inc. (NASDAQ:AAPL) will cut its forecasts and expectations in its latest quarterly results and criticized Apple bulls who were relentlessly talking about an upgrade cycle:
“Everybody on the planet is expecting Apple to cut their numbers, which I think will happen. And so then the question is going to be how do investors react to that, because the Bulls for the last three years have been, well, there’s an upgrade cycle coming. And so the multiples just kept expanding while numbers have come down. And so the question with Apple is, at a 29 PE with the S&P sitting at 22 times, do people sign up for a fourth year of trying to pretend an upgrade cycle is coming or not?”
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.
While the company is projected to achieve 9.5% EPS growth this fiscal year and 12.3% growth in the next, much of this growth is already priced in, as the stock trades at nearly 30 times the expected EPS for the fiscal year ending September 2026.
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 AI stocks analysts are focusing on these days. 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 time frame. 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.
