Wall Street hammered Apple for missing the initial GenAI wave and skimping on spending compared to rivals. Now, that’s being reevaluated. Investors are souring on the massive AI bets from OpenAI, Meta, and Microsoft — fueling wild swings in 2025’s hottest stocks. Suddenly, Apple’s whiff on GenAI has a silver lining.
Ryan Vlastelica and Carmen Reinicke:
While it’s still considered a potential AI winner, it doesn’t carry the risk of heavy capital expenditures and it does have ample cash on its books. That makes Apple shares a potential haven within the technology industry if the AI trade unwinds further.
“The hedge is it’s still a technology company, but not an AI company,” Brian Mulberry, client portfolio manager at Zacks Investment Management, said. “There is this positive feel for Apple that they don’t have to answer the big question that everybody else does, which is: What is the return on your invested capital in all of these other areas?”
The thesis is simple. Apple will benefit as it taps other companies’ models to deliver AI features to its millions of customers while avoiding much of the heavy spending required to develop its own capabilities, which is what many of its megacap peers are doing.
“Apple has the least exposure of the Mag 7 to AI in terms of where it is spending money and how leveraged it is,” said Brian Pollak, portfolio manager and head of the investment policy committee at Evercore. “It is absolutely true that it is a potential beneficiary of AI without having to spend all the capital that its cohorts are.”
“It has such a strong balance sheet, such strong cash flow, such a large moat in its business,” Pollak said. “All that makes it more defensive than the companies that have spent so much more on AI and are more leveraged to it.”
MacDailyNews Take: When life gives you lemons…
The obstacle is the way. – Marcus Aurelius
Please help support MacDailyNews — and enjoy subscriber-only articles, comments, chat, and more — by subscribing to our Substack: macdailynews.substack.com. Thank you!
Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.
Apple was not first in the personal computer world, but the Apple ][ changed things.
Apple was not first in the windowed/graphic computer world, but the Mac changed things.
Apple was not first in the personal, portable music player, but the iPod changed things.
Apple was not first in the cell phone world, but the iPhone changed things.
Apple was not first in the digital watch world, but the Apple watch changed things.
Being first rarely means being the best. Apple has time and again been late but came up with an industry changing product. Maybe, just maybe, Apple can do it again.
There is absolutely no guarantee that all those tech companies spending huge amounts of capex on A.I. infrastructure is going to yield significant profits. At least, not for all of them. There is going to be plenty of competition, but no one exactly knows how much demand there will be for A.I. services. It’s quite expensive to run data centers 24/7/365 and for all anyone knows, the largest data centers might be underutilized to the point that paying the bills might be impossible. That’s what happened in China, data centers were underutilized due to lack of demand for A.I. services. Another thing that could be a problem is there is so much competition that only lowering the cost of subscriptions will bring in customers. There could easily be a price war and a race to the bottom.
I don’t understand why investors can’t see this possibility happening. Do they actually believe that everyone is going to be using A.I. services? Why would educated people suddenly need to depend on A.I. to get things done? I occasionally use Gemini, but I still get answers that are incorrect, although for the most part it’s been useful to me. Still, I’m not going to pay for a subscription just to get a few answers now and then. If I ran a company, I would not be firing skilled employees to replace them with A.I. I would only want A.I. to help those employees carry out some tasks. As a human, I’m not in any rush to replace human employees or be replaced with some A.I. counterpart. I hate the idea that many dozens of data centers are going to be using up precious energy simply to keep tens of thousands of GPUs running constantly.
I’m glad Apple is being conservative in spending money on A.I. capex. Furthermore, I would prefer to have on-device A.I. rather than running on a cloud service. Companies should have started small and worked their way up in A.I. spending, instead of them all trying to have the largest and most powerful data centers on the planet without even knowing if there is a need for them. All that money could have been better served by educating humans. What a waste of money on massive data centers.