Apple’s $600 Billion Rally Fueled by Traders Fleeing AI Selloff

Apple Inc. shares have rallied 15% since June 25, adding nearly $600 billion in market value, as investors flee AI-related stocks amid concerns about heavy spending on artificial intelligence. The iPhone maker's decision to avoid the data center arms race is now seen as an asset, making it a safe haven compared to chipmakers and cloud-computing giants. Apple's 16% gain this year makes it the best performer among the Magnificent Seven tech giants.

Bloomberg -- Investors are flocking back to Apple Inc. as nervousness about artificial intelligence spending weighs on the stocks of chipmakers and cloud-computing giants. The iPhone maker's shares slumped last month in the wake of a disappointing presentation of upcoming AI features but have rallied 15% since bottoming on June 25, adding almost $600 billion in market value and pushing shares back to record territory. Over the same stretch, the Philadelphia Stock Exchange Semiconductor Index is down 7%, S&P 500 Index is up 3% and the technology-heavy Nasdaq 100 Index has gained just 1.3%. The stock's reversal reflects rising unease about the prospects for heavy spending on AI paying off, with Apple's decision not to participate in the data center arms race increasingly being viewed as an asset, rather than a liability, even though its AI offerings have repeatedly frustrated investors. "There's a battle in the market, and right now Apple is benefiting because it isn't in the storm that the rest of the AI trade is in," said Mark Bronzo, chief investment strategist at Rye Strategic Partners. "People are concerned about what kind of return hyperscalers could get from their AI spending, and there are also arguments that semis have gotten ahead of themselves. As a result, investors have gravitated back to Apple as a steady-eddy name without those risks." Despite the recent pullback over concerns about the sustainability of spending on AI computing, the semiconductor index is still up 83% in 2026, putting it on pace for its best year since 1999. But Apple's 16% advance this year has made it the best performer among the so-called Magnificent Seven tech giants, which also include Nvidia Corp., Alphabet Inc., Microsoft Corp., Amazon.com Inc., Meta Platforms Inc. and Tesla Inc. Alphabet and Amazon are both down more than 10% from May peaks, while Microsoft's 20% slump in 2026 has the stock on pace for its worst year since 2022. Apple's strength is all the more impressive considering the headwinds it faces from the rapid increase in prices for memory chips, which threaten the company's profit margins. In response, Apple raised prices on all Macs, iPads and home devices on June 25, which resulted in the stock's worst single-day drop since April 2025. While the hikes didn't include the iPhone, the company indicated there could be more price increases in the future. Apple is reportedly in negotiations to purchase chips from two Chinese semiconductor makers on a Pentagon blacklist in an effort to access cheaper memory chips. Analysts are optimistic that the moves will protect the company's margins and view Apple as less vulnerable than other hardware companies because its customers are less likely to balk at paying higher prices for devices. "Long-term trends suggest that pricing has limited implications on volume opportunity over a multi-year period," JPMorgan analyst Samik Chatterjee wrote in a July 7 note. "Apple has taken meaningful pricing across the portfolio in the past, and volumes have continued to expand despite those price increases." Meanwhile, investors see a potential catalyst in the upcoming release of a foldable iPhone expected in September. The device is expected to carry a high price tag and could entice more customers to upgrade their phones. Earlier this month, Nikkei reported that Apple told its suppliers to prepare to produce about 10 million foldable iPhones this year, up from a previous forecast of seven to eight million. "While Apple is immune from AI weakness, the main reason to not sell it is that it probably has a huge hit coming," said Louis Navellier, chief investment officer at Navellier & Associates. "Pricing for the folding phone will be so strong that it will offset the memory issue on margins, and I think demand will be so strong that it will really support growth." Apple's revenue is expected to expand nearly 15% in fiscal 2026, which ends on Sept. 30. That would represent its fastest annual growth since 2021 when the pandemic sent sales of electronic devices soaring. Net income is expected to rise 17%. While the company's profit and revenue growth is still tepid relative to its megacap peers, its conservative approach to spending means it's piling up more cash at a time when others are moving in the opposite direction. Apple's free cash flow is expected to be a record $140 billion this year, up more than 40% from 2025. By comparison, Alphabet's free cash flow is projected to fall about 67% this year to $21 billion. Of course, investors are paying a hefty premium for that. Apple is priced at 33 times profits estimated over the next 12 months, making it the most expensive stock among the Magnificent Seven aside from Tesla and well above its average over the past decade at 23 times. That's a key reason why just 61% of Wall Street analysts tracked by Bloomberg that follow the stock recommend buying it. By comparison, 90% of the analysts covering Microsoft, Amazon, Meta and Nvidia have buy ratings on those stocks, according to data compiled by Bloomberg. "Right now I own Nvidia but not Apple, since Nvidia's growth and valuation both look more attractive," said Rye's Bronzo. "However, so long as we're in an uncertain market, Apple's cash flow and services business will help it grind higher. If you think AI capex is going to keep expanding, buy Nvidia. But if you think it is going to slow, Apple is the better play." Tech Chart of the Day Investors are rotating beyond AI winners in emerging markets, where just three technology stocks worth $4.4 trillion drive an outsized share of returns. Top Tech News Taiwan Semiconductor Manufacturing Co. reported a 36% jump in quarterly sales, meeting elevated expectations while signaling global demand for AI computing remains intact. South Korea's AI-fueled stock rally came under renewed pressure Monday as SK Hynix Inc. tumbled by a record 15%, underscoring growing investor concerns that the boom had become overstretched. The European Union will propose a law to restrict children's access to social media, according to the bloc's top official, as part of a growing global consensus about the harm it causes. Chinese President Xi Jinping will make his first appearance at the country's flagship AI conference, signaling the growing importance Beijing attaches to the technology as its rivalry with the US intensifies. Earnings Due No major earnings expected --With assistance from Malavika Kaur Makol, Selcuk Gokoluk, Carolina Wilson and David Watkins.