Apple touches $5 trillion market cap as AI spending debate shifts

Apple touched a $5 trillion market cap for the first time on Tuesday, CNBC reported, briefly reaching the milestone a day after moving ahead of Nvidia as the world’s most valuable publicly traded company. The iPhone maker’s shares have risen 25% this year and traded as high as $342.89 on Tuesday before easing, according to CNBC.

The move puts Apple back at the centre of the megacap technology trade before its quarterly results on Thursday. CNBC reported that Apple has outperformed its large technology peers this year as investors have reassessed the costs and prospective returns of artificial intelligence investment across the sector.

Market capitalization is the total value investors assign to a listed company’s equity. It is calculated by multiplying the share price by the number of shares outstanding, so intraday moves in the stock can briefly push a company above or below a headline valuation threshold.

Why did Apple hit a $5 trillion market cap?

CNBC linked Apple’s rally to a shift in investor preference away from companies making large AI infrastructure commitments and toward Apple’s lower-capital-expenditure approach. Alphabet, Amazon, Meta and Microsoft are collectively spending hundreds of billions of dollars this year on AI buildouts, while Apple has kept capital expenditure low and uses cloud infrastructure and AI technology from Google, CNBC reported.

That distinction has become more significant as investors scrutinize whether large AI spending programs can produce sufficient returns. CNBC reported that concerns have grown around aggressive technology spenders taking on large amounts of debt and moving into negative cash flow without a clear route to large payoffs.

Apple had trailed other trillion-dollar technology companies in the market last year, according to CNBC, as investors questioned whether the company was falling behind in AI. Those concerns were tied in part to restrained spending and delays to an upgraded Siri, which CNBC reported is expected this fall alongside new iPhone hardware.

The competition between Apple and Nvidia reflects a wider debate about the future economics of AI. Nvidia, whose graphics processing units power many large AI models, became the first company to reach a $5 trillion valuation in October, CNBC reported. Its shares have gained 6% this year, making the stock a relative laggard against Apple’s 25% advance, according to CNBC.

What else is affecting Apple shares?

Apple’s stock has continued to rise even as the company has increased prices on some devices because of the global memory shortage, CNBC reported. Last month, Apple raised prices on MacBooks and iPads in what CNBC described as its first formal move to pass higher memory and storage costs to consumers after Chief Executive Tim Cook said increases had become unavoidable.

On Tuesday, Apple announced Upgrade, a program that will let U.S. customers lease iPhones and other products rather than buy them outright, according to CNBC. Leasing can lower the upfront payment for customers, while shifting the transaction into recurring payments over time.

Investors will next focus on Apple’s quarterly earnings call on Thursday. CNBC reported that it will be Cook’s final call as chief executive, with John Ternus set to take over on Sept. 1.

This story draws on original reporting from CNBC.