Investors give Apple a higher valuation as AI worries grow

In short: Apple’s stock is trading at a higher price than many other big tech companies, and one reason may be investor unease about AI risks.

What's going on

Apple’s shares have become more expensive compared with its peers. The Financial Times notes Apple is trading at about 36 times expected earnings, higher than Microsoft, Alphabet, Amazon, Nvidia, and Meta.

This is happening even though Apple is not expected to grow as fast as some of those companies. The market expects Apple’s earnings to rise at a high single digit rate in the next few years. Apple also faces challenges like rising costs and slower growth in its services business.

The column argues that investors may be looking for technology stocks that are not direct bets on the current AI spending race. Many AI-focused companies are pouring money into new computers and data centers to run and train AI systems. Apple is seen as more on the sidelines of that spending.

Another part of the explanation is trust. Apple has long promoted privacy, meaning it says it will protect customer data. At its recent phone launch, Apple said its “Apple Intelligence” features will run on the device when possible, and use an encrypted “private cloud” when more computing power is needed (encrypted means scrambled so others cannot easily read it, like a locked message).

What to watch

Apple still needs help from partners for some AI work, including using Google’s infrastructure, according to the column. Investors and customers will be watching whether Apple can keep its privacy promises while relying more on outside systems. If AI fears fade, or if Apple’s privacy story gets less convincing, this valuation gap could shrink.

Source: Financial Times