The bosses of the magnificent seven tech companies, which drove the S&P 500′s more than 50 per cent surge over the past years on Wall Street, turned out in force for US president Donald Trump’s swearing-in ceremony in Washington on Monday.
Tesla’s Elon Musk, Jeff Bezos of Amazon, Facebook owner Meta’s Mark Zuckerberg, Google parent Alphabet’s Sundar Pichai, Microsoft’s Satya Nadella and Apple’s Tim Cook took prime seats in the Capitol rotunda, leaving Nvidia chief executive Jensen Huang as the only absentee among the seven.
The billionaires will be hoping their collective show of support for Trump will dissuade him from proceeding with sweeping tariffs that might hurt their interests.
Almost all the heavyweight tech stocks have continued to advance this year. That is except Apple, which has slumped more than 8 per cent and which was usurped this week by Nvidia as the world’s most valuable company.
There have been concerns in certain quarters of the market in recent times about the valuation of Apple.
The group’s market capitalisation almost doubled over the past two years to $3.8 trillion (€3.6 trillion). But this was essentially driven by investors’ willingness to apply a much higher valuation multiple on its profits even as its earnings per share remained flat over the period. At the end of 2024, the stock was trading at 42 times earnings, a large premium to the three-year average ratio of 29.
Legal concerns have been weighing. Apple, having been forced last September by Europe’s top court to pay the Irish government €14 billion in back taxes and interest following a drawn-out legal battle, is also currently being investigated – along with Google and Meta – for breaches of the EU’s Digital Markets Act. And this week the UK’s competition watchdog announced investigations into the impact of Apple and Google’s mobile platforms on consumers and businesses which may result in more onerous rules for both.
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Cantor Fitzgerald analysts highlighted “ongoing antitrust and regulatory pressure” on Apple as a reason for investor caution towards the stock on Friday.
It’s also, apparently, been troubling Trump. The president let it be known on a teleconference address to the World Economic Forum in Davos, Switzerland, on Thursday that he isn’t happy about how the EU has treated Apple and other US tech giants. He specifically referenced the Irish tax case, a little over a month after he had hosted Cook for dinner at his Mar-a-Lago resort in Florida.
“These are American companies,” he told the Davos crowd. “Whether you like them or not, they’re American companies, and they shouldn’t be doing that. And that’s – as far as I’m concerned – a form of taxation. So, we have some very big complaints with the EU.”
Cook was among the procession of chief executives to pay personal homage to the former reality TV star since his election. But he was one of the few Big Tech leaders to forge a relationship with Trump during his first term – joining his advisory board for workforce policy and managing to convince him to roll back on tariffs on Chinese imports in 2019 that would have hurt Apple.
Investors in Apple have also been scurrying towards the sidelines ahead of its latest financial results next Thursday, covering its first financial quarter to the end of December. With good reason.
Sales of Apple iPhones plunged more than 18 per cent in China – the group’s biggest market after the US – during the quarter, independent research firm Counterpoint reported earlier this week. The decline in China drove a global slump of 5 per cent in iPhone sales during the key shopping period, feeding into a view Apple is facing market saturation in key markets.
Investment bank Jefferies analysts, led by Edison Lee, also downgraded their stance on Apple’s stock to the equivalent of a sell, saying not only will sales for the last quarter miss the group’s target, but analysts will also most likely have to lower their estimates for the current quarter. They also noted that consumer surveys on artificial intelligence (AI) features on its latest iPhone models have been generally negative – with most users saying they are “not useful, not accurate enough, and over-promising”.
“Current expectations for Apple Intelligence to kick-start a super upgrade-cycle are too high, in our view,” the Jefferies analysts said. “Apple Intelligence roll-out is likely to be gradual. Consumers are not yet interested in AI on smartphone, and hardware upgrade to enable smarter AI is expensive and could lead to further delay in AI scaling up to drive iPhone sales.”
Jefferies has also cut its forecasts for sales of Apple iPads, Apple Watches and AirPods.
Another brokerage, Loop Capital, also turned more cautious on Apple this week – cutting its stock recommendation to hold – saying it expects a “material iPhone demand reduction” beginning in the March quarter “but materially amplifying” in the following six months.
Analysts, on the whole, remain upbeat on Apple’s medium-term prospects. But the near-term outlook for the group – whose international operation in Cork is believed to be the largest taxpayer in the Republic – should remind the new Government here (along with the threat of a Trump tax war) of the inherent risks around a large chunk of its corporate tax base.
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