Ignoring risks to reach new highs, is the sky the limit for Apple?

According to the Zhitong Finance APP, among large technology stocks, Apple's (AAPL.US) revenue growth is the slowest, and it faces tariff-related risks during Trump's second term. However, from the stock price trend, these factors do not seem to have weighed down the stock's performance.

In the past month, Apple's stock price has risen nearly 9%, making it the second-best performer among the so-called "seven giants," only behind Tesla (TSLA.US). On Monday, U.S. stocks closed with Apple up 1.61%, reaching a price of $246.75, setting a new historical high. Despite the market's lukewarm response to the latest iPhone and a disappointing earnings report released at the end of October, Apple's stock price has recently increased. Investors seem to be very calm about these adverse factors, as the Apple volatility index (VIX) on the Chicago Board Options Exchange, which tracks estimated future volatility, recently hit its lowest level in nearly a year.

Andrew Choi, portfolio manager at Parnassus Investments, stated, "It is absolutely puzzling that the stock performs so well given the current situation in the Chinese market and the geopolitical confrontation we are about to face. It is surprising that the company's stock price has not experienced greater volatility considering these life-and-death issues concerning its core business."

Under the leadership of President-elect Trump, the severity and timing of tariffs remain unclear, but restrictions are expected to particularly target China, where most of Apple's devices are manufactured. While some are optimistic that CEO Cook will manage this risk as he did during Trump's first term, Jefferies analysts have calculated that the worst-case scenario could increase the cost of each iPhone by $256.

For Apple, any additional costs related to tariffs come at an inopportune time. The demand for the AI-driven iPhone is lukewarm, breaking the long-held hope that new models would bring a long-awaited acceleration in growth. In the past eight quarters, the company has experienced negative revenue growth in five of those quarters. Although a rebound is expected next year, the pace is still slower than that of other large technology companies.

Richard Clode, portfolio manager of the Janus Henderson Investors Global Technology Leaders Fund, stated, "The anticipated boost from the iPhone 16 upgrade cycle has not materialized, and now expectations have shifted back to the iPhone 17. Earlier this year, the market was overly pessimistic, and now it may be a bit too optimistic." However, some Apple investors seem unconcerned. They are betting that Apple will ultimately emerge as a winner in artificial intelligence, and that Cook will once again manage to avoid most of the tariffs imposed on China. Additionally, these investors favor the stock's defensive characteristics.

The company has not invested as much capital expenditure in artificial intelligence, especially compared to Microsoft (MSFT.US), Meta (META.US), Google (GOOGL.US), and Amazon (AMZN.US), which have all invested tens of billions of dollars to build their AI infrastructure. Instead, Apple is expected to benefit from the spending of other companies, as major AI platforms compete to integrate into Apple's ecosystem.

Choi from Parnassus Investments stated, "Apple will be the way to bring artificial intelligence to millions of consumers. Its advantage lies in being the 'throat point' between AI and consumers."

Greg Halter, head of research at Carnegie Investment Counsel, noted that the company also has significant quality characteristics, including substantial free cash flow and stable buybacks.

However, he mentioned that due to concerns about its valuation and growth, he has been reducing his holdings in Apple stock. He is also skeptical about the demand for an AI iPhone.

"It's expensive, and I don't know how you can explain it unless you really believe that the super cycle of the AI iPhone will significantly boost revenue and profit growth in the coming years," Halter said. "Really, what will drive the stock price higher from now on?"

Currently, the stock's expected price-to-earnings ratio is close to 33 times, more than 50% higher than the 10-year average. Berkshire Hathaway (BRK.A.US), owned by Buffett, and hedge funds have been reducing their stakes in Apple, indicating that the stock's P/E ratio is causing some unease.

Meanwhile, among analysts tracked by relevant institutions, fewer than two-thirds recommend buying the stock, making its popularity significantly lower than that of other large stocks. Although only 3 out of 60 analysts recommend selling, the average target price of $243.25 suggests that Wall Street believes there is no upside potential for the stock in the next 12 months