Summary of Key Points
Apple, which was previously criticized for its slow investment in AI, has now overtaken NVIDIA to become the company with the highest market value in the world by adopting a strategic approach that avoids excessive spending on AI. By using low-cost methods (spending $1 billion annually to upgrade Siri with Google’s models), Apple has reaped the benefits of AI while avoiding the “AI spending trap” faced by other tech giants. NVIDIA, Google, and Tesla have seen their stock prices decline due to heavy investment in AI, raising market skepticism about the effectiveness of this approach. However, Apple also faces challenges: its high valuation and rising costs for memory chips could squeeze its profits. This Thursday marks Cook’s last time hosting the earnings report as CEO, leaving behind a market value record and a unique strategy that has positioned Apple as a safe haven in the AI landscape.
1. Market Value Overtake: Apple Wins by Not Chasing AI Excessively
Apple’s stock price rose 1% on Monday, reaching a new historical high of $4.93 trillion, surpassing NVIDIA’s $4.78 trillion, which fell 5% on the same day. NVIDIA was once a hot topic in the market due to its AI chips, but recently doubts have arisen about whether the large-scale investment in AI is worthwhile. Its forward P/E ratio has dropped from 25.5 at the beginning of the year to 18.2, increasing selling pressure. In contrast, Apple outperformed the Nasdaq 100 index by 23 percentage points in July (the best monthly performance since 2005), suggesting that its more cautious approach to AI spending is not a disadvantage but an advantage in a market where others are spending heavily.
2. Apple’s Smart Use of AI: Investing Small to Reap Benefits
Instead of investing billions in building large AI models like Google and Tesla, Apple adopts a “light-asset” strategy. It pays Google $1 billion annually to use its Gemini model to enhance Siri, avoiding the massive costs associated with from-scratch training. Although rising memory chip prices have increased Apple’s expenses, this approach has helped its stock price stabilize. Strong demand for iPhones (with global market share increasing from 17% to 20%) has also supported its stock performance.
3. The AI Dilemmas of Other Giants
In contrast to Apple, Google’s parent company, Alphabet, recently revised its AI-related spending forecast for 2026 to $195-205 billion, resulting in a negative free cash flow for the second quarter (for the first time since going public). Tesla’s increased investment in autonomous driving and robotics also led to a decline in its stock price. These companies are facing financial pressure due to their heavy AI investments, and the market is questioning the effectiveness of this “growth-at-all-costs” model.
4. Apple’s Challenges: High Valuation and Rising Costs
Apple’s current P/E ratio of over 30 times (compared to the S&P 500’s 22 times) raises concerns among analysts. They warn that a poor earnings report this Thursday (e.g., due to memory chip price increases squeezing profits) could cause its stock to fall. With memory chip prices rising and the entire smartphone market experiencing price hikes, Apple cannot avoid these impacts. Some investors argue that Apple’s valuation is inflated given its lack of significant AI investment.
5. Cook’s Final Performance as CEO: A Legacy of Market Value and a Strategic Advantage
This Thursday’s earnings report will be Cook’s last as CEO (he will retire on September 1). He leaves behind not only a market value record but also a unique strategy that has helped Apple survive the AI boom by avoiding reckless spending. The new CEO will face the challenge of maintaining this advantage while competing in an increasingly competitive AI landscape.
The essence of this situation is a shift in the market’s attitude towards AI from excessive investment to a more pragmatic focus on costs. Apple’s cautious approach aligns with this trend, but whether it can continue to thrive depends on its financial performance and future AI strategies.