ETFs in Focus as Apple Reclaims Most Valuable Title

Apple Inc. AAPL has regained its position as the world's most valuable company, topping Microsoft Corp. MSFT. This achievement marks a significant milestone, driven by Apple's recent announcement related to its generative AI initiative called "Apple Intelligence".

These potential AI initiatives generated optimism about future iPhone generations and likely revenue increases. Apple Intelligence will be available for the iPhone 15 Pro, iPads, and Macs running Apple's M1 series chips and newer models starting this fall. This could even result in a rebound in iPhone sales following recent declines in fiscal performance.

Market Capitalization and Recent Performance

Thanks to investor optimism surrounding its growth prospects, particularly in AI, Apple just logged its best three-day run since 2020, per Bloomberg. Following a robust rally, Apple closed with a market capitalization of $3.285 trillion on Jun 13, 2024, narrowly surpassing Microsoft at $3.282 trillion.

This is the first time since January that Apple has exceeded Microsoft in market value, reflecting recent reshufflings among Wall Street's top stocks. In fact, earlier in the week, Apple briefly fell behind Nvidia Corp. NVDA in market capitalization. However, investors have shown confidence in Apple's potential as a likely AI winner, fueling its recent gains.

Analyst Insights

Bank of America analyst Wamsi Mohan highlighted the potential of AI functionalities to drive a significant upgrade cycle for Apple, potentially raising average selling prices and boosting revenue in the coming years, as quoted on Bloomberg.

Price Target

Based on short-term price targets offered by 30 analysts, the average price target for Apple comes to $206.96. The forecasts range from a low of $164.00 to a high of $275.00. And the current price of Apple is $214.24.

What Lies Ahead?

So far, Apple's AI initiatives have been well-received by investors. However, stiff competition awaits Apple in the AI space. Stocks with more direct exposure to AI, such as Microsoft, Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc., have shown stronger performance in 2024. Nvidia, in particular, has seen immense gains due to its prominent role in AI development.

Plus, Apple's association With ChatGPT has received a mixed response. Ben Wood, chief analyst at CCS Insight, and Tesla chief Elon Musk believe that ChatGPT integration may create deeper problems for the firm, as quoted on BBC.

Investors should note that Apple's competitors have faced several AI hiccups during the initial phase of the rollout. Apple might also experience similar hiccups. Hence, it is better to track the company with the ETF approach. The basket approach minimizes the company-specific concentration risks.

Apple-heavy ETFs include the likes of Technology Select Sector SPDR Fund XLK, iShares Global Tech ETF IXN and iShares U.S. Technology ETF IYW. Incidentally, these ETFs have solid exposure to Microsoft—the second-most valuable company and an AI winner.

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