2025 is now drawing to a close, and while the broader markets are set to deliver double-digit returns for the third consecutive year, we saw a rotation of sorts. After leading the stock market rally from the front over the previous two years, the “Magnificent 7” stocks took a back seat. And if not for the 65% rise in Alphabet (GOOG) (GOOGL), the group’s weighted average returns would have trailed that of the tech-heavy Nasdaq Composite Index ($NASX). While some Magnificent 7 names, particularly Nvidia (NVDA), delivered triple-digit returns in 2023 and 2024, this year none have found a way even into the top 25 gainers in the broad-based S&P 500 Index ($SPX).
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Based on our perception of the technology, we may or may not term the 2025 price action as the artificial intelligence (AI) bubble bursting, but one thing was clear this year: investors are not buying into the ever-rising AI capex story and are increasingly getting worried about the toll they are taking on tech companies’ cash flows.
But things are not as straightforward, and just as markets are punishing companies for their overexuberance towards AI, underinvestment isn’t getting rewarded either, with Apple (AAPL) being a prime example.
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Ever since the AI euphoria began in 2023, Apple has been trying to shed the perception that it is slacking on the technology even as other tech companies race ahead. This is not to say that the Tim Cook-led company is resting on its past laurels and has taken several measures to catch up. Among others, Apple has gradually added AI features to its iPhones as part of “Apple Intelligence” and plans to release the updated Siri next year.
It has increased its capex towards AI, and during the fiscal Q3 2025 earnings call in July, Cook said that Apple is “reallocating a fair number of people to focus on AI features within the company.” Without providing specifics, Cook discussed an “exciting road map ahead” for new AI products and did not rule out the possibility of a major acquisition to bolster its AI capabilities. I, however, have serious doubts about the company acquiring Perplexity, as was previously rumored, given their vastly different approaches to customer privacy.
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Notably, one of the reasons Apple is running behind in AI is the company’s focus on privacy, which is atypical for AI that feeds on massive amounts of data. However, I believe it could be the company’s unique selling proposition (USP), as users concerned about AI companies snooping on their data would find solace in the Apple ecosystem, which prioritizes user privacy at its core.
Overall, I would say that Apple took quite a balanced and measured approach towards AI, and while it did miss out on first-mover advantage, the Cupertino-based giant was never known for being one. Some of its most successful products, like the iPod, iPad, and iPhone, were launched when competitors were already offering competing products.
Apple was never really a bet on AI, and the company’s efforts to capitalize on the technology, which is being touted as the next big thing since the internet, leave a lot to be desired. The company, however, took baby steps in a typical Apple way and is trying to improvise upon what others are doing—as the common adage about the company goes, “Apple doesn’t need to be first. They just need to be the best.”
That said, Apple would be one name to double down on if you are worried about an AI bubble, as the stock never really benefited from the AI rally and is therefore at the least risk in a crash. Apple could be a bastion of safety and could see buying interest if the long-feared AI bubble bursts. Otherwise, I don’t see the stock outperforming the average Magnificent 7 peer by a significant margin in 2026. While strong expected sales of the iPhone 17 would keep sentiment buoyed, there is not much on the table at a forward price-to-earnings (P/E) multiple of around 34x.
The consensus view is not overtly bullish for AAPL stock either, and it is rated as a “Moderate Buy” based on the consolidated ratings of 40 analysts tracked by Barchart. The stock’s mean target price of $290.85 is just about 7% higher than current price levels. Among its Magnificent 7 peers, only Tesla (TSLA) has a lower rating than Apple.
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On the date of publication, Mohit Oberoi had a position in: AAPL, NVDA, TSLA, GOOG. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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