As an avid Apple Music user, I felt left out during Spotify Wrapped Day earlier this week. Most of my friends and colleagues who use Spotify happily swapped music preferences throughout the day while I sat outside.
“But Apple has an intuitive interface and better audio quality,” I muttered to no one over my coffee.
As it turns out, retail investors are treating Apple like an afterthought as well. During the shortened Thanksgiving week, they rushed into all Magnificent 7 stocks except Apple, pulling out $96 million, according to JPMorgan data. (For context, Nvidia led the $650 million influx.)
Additionally, JPMorgan found that day traders consistently shorted Apple throughout the year. This is consistent with Schwab data showing that the company’s customers were net sellers of Apple in the third quarter.
The reason is relatively simple to anyone who has been watching this year’s AI race. Apple is late, or at least that’s what investors perceive.
While fellow contestants Nvidia, Microsoft, and Meta are loudly pouring tens of billions into AI and striking huge deals with each other, Apple is keeping its usual quiet demeanor.
The secrecy and care that helped the company develop and mass-produce some of the world’s most popular consumer products is now seen as a drawback. Apple’s competitors have become increasingly aggressive and are struggling to match that energy.
Reflecting the cooling interest in retail, Apple’s stock performance has been middling, especially given its high prices. It’s up 12% year-to-date, trailing the S&P 500 by nearly 5 percentage points. The company has had an annual return of more than 30% in five of the past six years.
It’s not just retail investors who have a cold attitude toward Apple. Berkshire Hathaway has cut its stake in the company by two-thirds since its peak (though the stock remains Berkshire’s top holding by value). Viking Global went so far as to sell all its shares in the fourth quarter of last year.
When it comes to Apple’s current situation, we can’t ignore the departure of the company’s head of AI. It’s true that competition for talent is fierce in the industry, but Apple has more cash on hand than most small countries. If you want to pay to keep key players, you can.
It can’t be helped that criticism comes from upper management. The co-inventor of the technology behind Siri recently said it was a mistake to make the AI agent voice-only.
Still, I probably won’t get around to showing off my violin for Apple. It’s still an undeniable juggernaut.
But a newly revived Alphabet is looming close behind, and Microsoft isn’t far behind. It could soon lose its status as the second most valuable company.
After all, there’s a difference between becoming a huge company with huge profits and having your stock price crash through your peers and rise forever. Apple may ultimately have to settle for the former.
