Apple nears $4 trillion valuation on AI momentum and iPhone supercycle hopes

Apple is on the brink of achieving an unprecedented milestone: a $4 trillion stock market valuation. Propelled by investor enthusiasm for artificial intelligence (AI) and expectations of an iPhone upgrade boom, the tech giant’s shares have surged 16% since November, adding $500 billion to its market cap.

Currently valued at $3.85 trillion, Apple already outshines the combined market capitalisation of Germany and Switzerland’s main stock indices.

The rally reflects growing confidence in Apple’s late but promising strides in AI. “Investor enthusiasm for artificial intelligence and an expectation that it will result in a supercycle of iPhone upgrades,” explained Tom Forte, an analyst at Maxim Group, summarises the current market sentiment.

In December, Apple began integrating OpenAI’s ChatGPT into its devices, following its announcement in June to weave generative AI into its app ecosystem. The move is seen as a critical step in rejuvenating demand for the iPhone, which has faced muted momentum for the iPhone 16 series during the holiday season.

While the company anticipates modest revenue growth in its fiscal first quarter, analysts, including Morgan Stanley’s Erik Woodring, expect a rebound in iPhone sales by 2025. “Although near-term iPhone demand is still muted… as Apple Intelligence features and geographic availability expand, it will help drive improvement in iPhone demand,” Woodring said, reaffirming Apple as Morgan Stanley’s top pick for 2025.

Apple’s price-to-earnings ratio has hit a near three-year high of 33.5, surpassing tech peers like Microsoft and Nvidia. This valuation comes amid broader market concerns about inflated stock prices, which have prompted Warren Buffett’s Berkshire Hathaway to trim its holdings in Apple.

However, investors remain bullish on the tech giant’s resilience. “Technology has been regarded by investors as a new form of a defensive sector because of their earnings growth,” said Sam Stovall, chief investment strategist at CFRA Research.

Despite its dominance, Apple faces potential challenges, including retaliatory tariffs on Chinese imports under the incoming U.S. administration. Analysts like Woodring are optimistic that Apple will secure product exemptions, much like during the first round of tariffs in 2018.