Apple's Stock Is For Losers

Across this year, shares of the “Magnificent Seven” have not traveled in the same direction. Among the best examples of how differently they have performed is that Nvidia (NASDAQ: NVDA) has moved higher by 28% this year. Apple (NASDAQ: AAPL) is down 16%. Nvidia is the world’s market cap leader at $4.2 trillion. Apple, which had been the most valuable company for years, has dropped to third place with a market capitalization of $3.2 trillion.

The trading patterns in Apple and Nvidia are based almost entirely on the fact that one is the AI sector’s leader, and the other has fallen hopelessly behind.

Nvidia has about 90% of the global market share for add-in-board GPUs, which is a primary reason for the rally. And Nvidia’s earnings have been strong. In its quarterly report, it offered a rosy picture of its near-term future. Revenue increased 69% year-over-year to $44.1 billion. Per-share earnings rose 27% to $0.76. The company added, “Excluding the $4.5 billion charge and related tax impact, first quarter non-GAAP diluted earnings per share would have been $0.96.”

In the current quarter, the company expects revenue of $45 billion, plus or minus 2%. Its extraordinary revenue growth continues. According to Yahoo, the analysts’ forecast is slightly higher than that.

Because industry analysts believe AI server farm construction will rise, Nvidia’s earnings could rise at the current pace for years.

Apple has missed the introduction of advanced AI features among the largest tech companies. And, recently, its rivals have started to hire away its AI software talent. Apple says its next-generation AI product will be introduced next year. The market expected that to happen at about the same time the iPhone 16 was launched. iPhone users can download most consumer-facing AI software from their competitors, like OpenAI, for free. The iPhone can have state-of-the-art AI features, but they are not Apple’s.

It has become increasingly clear that Apple cannot catch up to AI market leaders. Every day, it falls further behind. It may soon become nothing more than a hardware company. It may continue to be that sector’s leader, but it’s not what investors want.