Important points
- Record high: Apple’s market capitalization is back near all-time highs ~US$4.2 trillionis close to reclaiming the top spot from Nvidia.
- AI lag turned into a tailwind: What was seen as an AI laggard has turned into a positive as Apple pursues a more capital-efficient AI path. The enhanced upgrade cycle for iPhone 17 signals an acceleration of demand, given that smartphones are likely to remain the primary AI gateway.
- Revenue visibility: Record the above service revenue $100 billion consensus expectations EPS growth rate for FY26-27 is approximately 10% These forecasts are not guaranteed, but they support the earnings and cash flow story.
- risk: rich Future forecast PER is approximately 35 timesa potential cooling in demand for the iPhone 17 (particularly in China), AI implementation, continued regulatory oversight, and more make the stock sensitive to any negative surprises.
Background: The laggards finally wake up.
For most of 2025, Apple was an outlier among mega-tech companies. The Nasdaq underperformed as investors invested heavily in AI infrastructure and semiconductor stocks. Sentiment remained cautious due to concerns about a slowing iPhone upgrade cycle, weak Chinese demand, and delays in the on-device AI roadmap.
Recently, Apple’s return to record highs has been one of the most notable changes in global stock market leadership. The company’s market capitalization reached approximately 50 million yen. $4.2 trillionovertaking Nvidia as the world’s most valuable publicly traded company is also within reach. In our view, the combination of improving fundamentals and early underweight positioning has created fertile ground for some catching up.
iPhone 17 is a turning point
The most important changes are: Evidence that the iPhone 17 cycle is stronger than expected:
- Early sales data in the US and China shows double-digit growth compared to last year’s iPhone 16 launch.
- The research institute is currently iPhone shipments will increase by approximately 10% in 2025Apple continues to lead Samsung in global smartphone share once again.
- Earnings lines are starting to reflect this. iPhone revenue has returned to growth after several weak quarters.
Given that the iPhone remains the core gateway to Apple’s services and software stack, the healthier upgrade trajectory supports the narrative that Apple is regaining momentum in its product cycles. in our opinionthis is especially important now that most consumers are expected to engage with AI primarily through smartphones rather than dedicated devices.
Service strengths support re-evaluation
Apple’s services business (App Store, iCloud, Apple Music, TV+, payments) continues to expand at high profit margins. exceeded $100 billion in annual revenuesubscription momentum is strong across the region.
In our view, this has several implications.
- The service is now large enough to stabilize revenue even as hardware cycles slow.
- A growing installed base gives Apple the flexibility to monetize features such as: AI-enabled on-device toolscloud storage and content bundles.
Bloomberg consensus forecasts show that EPS growth of approximately 10% in FY2026 and FY2027in parallel with a gradual improvement in margins, reflecting an increase in service contributions. These forecasts are based on Bloomberg analyst estimates, are subject to change, and are not guaranteed. But at a time when many investors are putting their money toward more predictable cash flows, the shift to recurring revenue is an important support for valuations.
A more trustworthy AI story is emerging
In our opinion, being “late” to the AI race has been an unexpected advantage for Apple. Apple avoided extreme action GPU-driven capital investment cycle While this is currently weighing on some parts of the market, it still stands to benefit from mass-market AI adoption.
Recent developments that have increased reliability include:
- Management has hinted at enhanced AI messaging and deeper integration of Apple Intelligence across apps and devices.
- We believe the focus has shifted from competing with hyperscalers to driving multi-year device upgrade cycles. — Position AI as the reason to modernize iPhone, iPad, and Mac, rather than aiming to win the race for the biggest underlying model or largest data center footprint.
- Apple’s AI leadership has been revamped. The company appointed Amar Subramanya As Vice President of AI, he is a veteran who spent many years at Google and most recently led AI at Microsoft. This represents our efforts to accelerate our foundational models, on-device intelligence, and AI safety roadmap.
- Apple is consolidating Google’s Gemini AI model Integrate Apple Intelligence with the new Siri and run it on your own private cloud computing infrastructure. In the emerging “Google vs. Nvidia” AI decentralization story, Apple is increasingly in the “Google camp,” with a growing recognition that it is emphasizing more efficient, customized, and increasingly on-device computing rather than a strategy that relies on an increasingly large fleet of Nvidia GPUs.
Compared to the tens of billions of dollars in additional capital investment required for AI data centers in other regions, Apple’s approach is generally viewed as: more capital efficientrelying on proprietary silicon and on-device inference rather than chasing hyperscale GPU buildouts.
So while many investors currently see Apple as a way to participate in AI themes without being directly exposed to the AI capex cycle, this perception could change as the competitive landscape evolves.
Technological capabilities amplified this movement.
As fundamentals changed, flows amplified price movements.
- Analysts raised their profit estimates and price targets as trends in iPhone and services improved.
- Apple remains in the top 15 Over 400 ETFs worldwidea certain amount of passive demand is created whenever investors convert to large-cap quality or reduce exposure to higher beta segments.
- Large-scale share buybacks support EPS and continue to reduce the supply of free float.
Amid broader stock market volatility and questions about the sustainability of AI infrastructure spending, some market participants appear to be viewing Apple as relative. safe haven However, this is an acknowledgment and not a guarantee and does not eliminate the risk of drawdown.
What can sustain the rise?
From here, positive scenario Because, in our view, stock prices are determined by the fulfillment of several conditions.
- Holiday quarter iPhone 17 sell-through Check for more powerful upgrade cycles.
- Service revenue continues to increase We are achieving high profit margins at a pace in the mid-teens.
- AI capabilities are on track to roll out until 2026supporting further device monetization.
- Potential optionality foldable And a new form factor.
In our opinion, if Apple could survive Service growth of over 20% and Hardware growth rate is low single digitsthe earnings outlook will remain relatively strong even if macro volatility increases. However, none of these results are guaranteed and will depend on both implementation and the broader economic environment.
Key risks investors should monitor
To balance the picture, we highlight some key risks.
- Product cycle risks: Demand for the iPhone 17 could cool faster than current early cycle indicators indicate, especially given China’s focus on local brands and intense competition in the premium and midrange segments.
- AI execution risk: Any delays in the Siri revamp, the rollout of Apple Intelligence, or the perceived gap with competing AI capabilities could reintroduce the “Apple is behind” narrative.
- Evaluation sensitivity: Apple is currently trading at a forward P/E ratio of approximately 15,000 yen. 34 to 35 timesabove the long-term average, making them more susceptible to changes in sentiment, interest rate expectations, and disappointments in products and earnings cycles.
- Regulatory and legal risks: Continued scrutiny of app store fees, competition issues, and the power of digital platforms could lead to changes in business practices, fee structures, or penalties over time.
conclusion
Overall, Apple’s move to all-time highs More powerful iPhone data, record service revenue, a more reliable and capital efficient AI strategy, and stronger passive flows.set against a background of meaningful evaluation and implementation risk. How the balance between these forces changes will determine whether the current reassessment proves durable.
Read the original analysis: Apple’s AI catch-up: What’s driving its move to record highs?
