Cupertino:

Apple is closing in on a historic $4 trillion stock market valuation, powered by investors cheering progress in the company’s long-awaited AI enhancements to rejuvenate sluggish iPhone sales.

The company has pulled ahead of Nvidia and Microsoft in the race to the monumental milestone, thanks to an about 16% jump in shares since early November that has added about $500 billion to its market capitalization.

The latest rally in Apple shares reflects “investor enthusiasm for artificial intelligence and an expectation that it will result in a supercycle of iPhone upgrades,” said Tom Forte, an analyst at Maxim Group, who has a “hold” rating.    

Valued at about $3.85 trillion as of the last close, Apple dwarfs the combined value of Germany and Switzerland’s main stock markets.

The Silicon Valley firm, driven by the so-called iPhone supercycles, was the first U.S. company to hit previous trillion-dollar milestones.

In recent years, the company has attracted criticism for being slow to map out its artificial intelligence strategy, while Microsoft, Alphabet, Amazon and Meta Platforms have pulled ahead to dominate the emerging technology.    

Shares of Nvidia, the biggest AI beneficiary, have surged more than 800% over the past two years, compared to the near doubling in shares of Apple during the same period.

Apple earlier in December started integrating OpenAI’s ChatGPT into its devices after unveiling plans in June to integrate generative AI technology across its app suite.

The company expects overall revenue to increase “low- to mid-single digits” during its fiscal first quarter – a modest growth forecast for the holiday shopping season – sparking questions about the momentum for the iPhone 16 series.

However, LSEG data showed analysts expect revenue from iPhones to rebound in 2025.

“Although near-term iPhone demand is still muted … it is a function of limited Apple Intelligence features and geographic availability, and as both broaden, it will help to drive an improvement in iPhone demand,” Morgan Stanley analyst Erik Woodring said in a note, reiterating Apple as the brokerage’s “top pick” heading into 2025.

The recent surge in shares has pushed Apple’s price-to-earnings ratio to a near three-year high of 33.5, compared to 31.3 for Microsoft and 31.7 for Nvidia, according to LSEG data.

Warren Buffett’s Berkshire Hathaway has sold shares of Apple – its top holding – this year, as the conglomerate broadly retreated from equities on concerns over stretched valuations.

“I suspect the stock in three years will not look as expensive as it does today,” said Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, which holds Apple shares.

Apple faces the risk of retaliatory tariffs if U.S. President-elect Donald Trump delivers on his promise to slap tariffs of at least 10% on goods coming from China.

“We believe it’s likely Apple gets exclusions on products like iPhone, Mac and iPad, similar to the first round of China tariffs in 2018,” Woodring said.

Apple’s shares tumbled last Wednesday amid a Wall Street selloff after the Federal Reserve forecast a slower pace of rate cuts next year but investors expect the broad trend of monetary easing to support stock markets next year.

“Technology has been regarded by investors as a new form of a defensive sector because of their earnings growth,” said Sam Stovall, chief investment strategist at CFRA Research.

The Fed’s action “could end up having a greater impact on some of the other cyclical areas such as consumer discretionary and financials and less so on technology.”

“Apple’s approach to $4 trillion market cap is a testament to its enduring dominance in the tech sector. This milestone reinforces Apple’s position as a market leader and innovator,” said Adam Sarhan, chief executive officer of 50 Park Investments.
 

Apple Inc has asked its tech-support staff not to give out any information regarding the controversy over iPhone 12’s radiation levels in France, reported Bloomberg. France has asked Apple to stop selling iPhone 12, claiming that the model emits electromagnetic radiation higher than the European Union standards. If customers query about this, the employees have been asked to say they have nothing to share, according to the report.

They must also reject any return or exchange request if bought over two weeks ago, which is the normal return policy of Apple, the report said. They must say their products undergo rigorous testing for safety if customers seek to know if their phones are safe, it added.

France’s digital minister said the radiation levels of iPhone 12 were found to be higher than the EU standard, but still significantly lower than what’s considered dangerous. He said a software update would be enough to fix the issue and expected a reply from Apple within two weeks.

Apple has countered the claims and said they would work with the French government and prove the handset is compliant.

Concern In European Union

After France, Belgium too has raised concerns over the health risks related to iPhone 12. The country’s junior digital minister said he would ask the telecoms regulator to analyse the potential threats linked to the handset.

Meanwhile, Germany’s telecoms regulator said it would examine the radiation concerns and that the French procedure serves as a guiding function for Europe as a while.

The Dutch too are looking into the French report and will ask the company for an explanation, an official said.

The iPhone 12 model debuted in 2020 and is currently in the process of being phased out with the introduction of iPhone 15 this week.