The AI selloff has led to the emergence of an unlikely winner

The iPhone maker is seeing renowned investor interest despite a recent slump after raising prices of its various products, including the iMac. However, shares of the Cupertino-based tech giant have risen 16% since making a low on June 25.

In comparison, the Philadephia Semiconductor index is down 10%, the S&P 500 is up 3%, while the Nasdaq 100, of which Apple is a part of, is up only 0.3% during the same period.

Apple’s year-to-date surge has made it the best performer among the magnificent seven group of stocks, which includes Nvidia, Alphabet, Microsoft, Amazon, Meta Platforms, and Tesla.

Both Apple and Amazon are down over 10% from their record high levels in May, while Microsoft’s 20% drop year-to-date has put the stock on course for its worst calendar year performance since 2022.

Apple has gone on to hint that there could be more price hikes in the future as the memory chip shortage has sent input prices through the roof. The company has not specified whether subsequent rounds would include the iPhone as well, which was excluded from the latest round.

Analysts tracking the stock have now cited the release of an upcoming foldable iPhone in September this year as the next big trigger for the stock. According to a Nikkei report, Apple has told its suppliers to prepare a production capacity of about 10 million foldable iPhones this year, higher than the earlier projection of 7 million to 8 million.

For the fiscal that ends on September 30 this year, Apple’s revenue is likely to grow by 15% from last year, which would mark its fastest annual growth since 2021. Net profit may grow 17% year-on-year, as per consensus estimates. Free cash flow is likely to be at a record $140 billion, higher by more than 40% from last year. In contrast, Alphabet’s FCF is projected to decline by 67%.

While Apple has been the best performing stock among the magnificent seven names this year, it is also the second-most expensive one after Tesla. It trades at 34 times its profits estimated over the next 12 months, well above its 10-year average of 23 times.

Valuations is also one of the reason why only 61% of the analysts covering Apple have a “buy” rating on the stock, in contrast to Micrsoft, Amazon, Meta and Nvidia, where more than 90% of the analysts have a “buy” rating.

(With Inputs From Agencies)