Apple Inc. has faced plenty of criticism from Wall Street for not spending as aggressively on artificial intelligence as its Big Tech rivals. But that strategy is suddenly a blessing for the iPhone maker.
Investors are beginning to scrutinize the huge sums companies like OpenAI, Meta Platforms Inc. and Microsoft Corp. are spending on AI, leading to heavy volatility in what had been some of the year’s biggest momentum plays. As a result, Apple’s position is being re-evaluated.
While it’s still considered a potential AI winner, it doesn’t carry the risk of heavy capital expenditures and it does have ample cash on its books. That makes Apple shares a potential haven within the technology industry if the AI trade unwinds further.
The trend is playing out in early Tuesday trading, as Apple shares are up 0.8% and the leading point gainer in the S&P 500 Index, while AI darlings Nvidia Corp., Meta and Microsoft are all dragging the market down.
“The hedge is it’s still a technology company, but not an AI company,” Brian Mulberry, client portfolio manager at Zacks Investment Management, said. “There is this positive feel for Apple that they don’t have to answer the big question that everybody else does, which is: What is the return on your invested capital in all of these other areas?”
The thesis is simple. Apple will benefit as it taps other companies’ models to deliver AI features to its millions of customers while avoiding much of the heavy spending required to develop its own capabilities, which is what many of its megacap peers are doing.
“Apple has the least exposure of the Mag 7 to AI in terms of where it is spending money and how leveraged it is,” said Brian Pollak, portfolio manager and head of the investment policy committee at Evercore Wealth Management. “It is absolutely true that it is a potential beneficiary of AI without having to spend all the capital that its cohorts are.”
Apple’s capital expenditures are expected to be about $14 billion in its current fiscal year, which ends in September 2026. By comparison, Microsoft is projected to have capex of more than $94 billion in its own fiscal year, which ends in June. And Meta, a company half Apple’s size, is set to have capex of more than $70 billion in 2025.
You can see the difference in how Apple’s stock trades. In a year dominated by AI enthusiasm, it’s the worst performer in the Bloomberg Magnificent 7 Index, climbing just 8.4% in 2025 compared with Alphabet Inc.’s 52% jump and Nvidia’s 45% gain. Even the S&P 500 and Nasdaq 100 indexes are handily beating it this year.
However, when tech shares got hit last week amid rising concerns about AI spending, Apple outperformed its rivals and the indexes, finishing the five sessions almost flat while the rest were well into the red. In fact, over the second half of the year, Apple shares are up 32%, far outdistancing the S&P 500, Nasdaq 100 and many of its Big Tech competitors.
“It has such a strong balance sheet, such strong cash flow, such a large moat in its business,” Pollak said. “All that makes it more defensive than the companies that have spent so much more on AI and are more leveraged to it.”
Even on Monday, the separation was apparent, as AI stocks leaped on renewed optimism about the end of the US government shutdown, while Apple muddled along due to concerns about delays to next year’s version of the iPhone Air.
The different treatment is key as investors start to get concerned about the degree of AI spending and want to see some returns from those investments.
“Momentum is slowing and there’s less interest in buying the dip,” said Mark Grant, chief global strategist at Colliers Securities. “The valuations of some of these AI stocks have gotten out of hand.”
Apple’s latest earnings report featured a positive forecast, though results were mixed and showed a surprise decline in China revenue. However, some of its Magnificent 7 peers, including Meta and Microsoft, were punished for heavy capex and revenue outlooks that underwhelmed. Meta shares, for example, plunged more than 11% on Oct. 30, their worst day in three years, after Chief Executive Officer Mark Zuckerberg emphasized the need to spend even more on AI during the company’s earnings call.
To be sure, there continues to be a lot of optimism about AI, and megacaps are hardly at risk of losing their status among the most popular stocks in the market. The skepticism is healthy even if it’s being “overstated,” according to Bank of America analyst Vivek Arya.
“The pervasive skepticism re AI capex is understandable but likely a contrarian positive, helping minimize overcrowding,” he wrote in a Nov. 10 note. Recent weakness reflects unrelated issues like the government shutdown, while “the underlying demand environment remains robust.”
All of which has investors wondering what Apple’s role is in a stock market dominated by AI growth. Is it a hedge against a sudden downturn? Or is it just a Big Tech investment that’s failing to fully capitalize on the current trend?
“I think Apple isn’t a hedge, it’s just a laggard stock,” said Vikram Rai, portfolio manager and macro trader at First New York. “I just don’t think it will give you the pop that you want to give you alpha in your portfolio.”
Tech Chart of the Day
SoftBank Group Corp. sold its entire stake in Nvidia Corp., pocketing $5.8 billion ahead of a rash of planned investments by founder Masayoshi Son to build his own sphere of influence supporting artificial intelligence. Nvidia underperformed fellow Magnificent Seven stocks in premarket trading Tuesday.
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