While most of the big tech stocks on Wall Street are sliding under the influence of a new Chinese AI model, Apple (AAPL.US) shares have rebounded by 3.2% from the recent low caused by disappointing iPhone sales dynamics in China.
The Cupertino giant's resistance to today’s Big Tech selloff is mainly due to its limited exposure to the entry of a Chinese competitor into the lucrative artificial intelligence market. Unlike its peers in the Magnificent 7, Apple’s spending on large-scale AI infrastructure is relatively conservative, with the company focusing on the development of models implemented directly into its proprietary devices. This reduces widespread concerns in the sector about overinvestment in the latest hardware without clear profitability. iPhones themselves can handle smaller AI models, and if performance continues to improve and models are better tailored to specific needs, this could fit into the "winning narrative" of China’s DeepSeek.
Volatility in the coming days will be influenced by the upcoming publication of results for Q4 and the entire 2024 fiscal year. The negative sentiment surrounding Apple stems mainly from a 17% drop in iPhone shipments to China and a 500 yuan price cut to sustain sales momentum. The company’s growth indicators also leave much to be desired: a 2% year-over-year revenue increase, a 0.82% drop in EPS, and a decrease in CAPEX below the sector average are putting significant pressure on the company's stock, emphasizing the importance of expectations for the upcoming results.
Apple shares bounced back last week from resistance around $220, currently trading near the 78.6% Fibonacci retracement level. Source: xStation5
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