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The stock market has remained upbeat despite the challenging macroeconomic backdrop, with the benchmark S&P 500 index and the tech-focused Nasdaq Composite index hitting all-time closing highs last week. The AI-frenzy drove major tech giants to massive highs, driving the Nasdaq composite index up by over 18% this year.
The slowing inflation levels have boosted consumer sentiment, propelling hopes for a rate cut soon. According to data released by the Commerce Department, the core personal consumption expenditures price index rose at its slowest annual rate in more than three years in May.
However, despite the bullish outlook, broader concerns still linger, raising questions regarding the sustainability of the tech surge.
“We may see more volatility,” John Tyner, portfolio manager at Aptus Capital Advisors, said. “All in all, everyone is enjoying the last 10 months of the market because it’s been easy, [but] at some point, the complacency will have to end.”
Apple
Apple Inc. (NASDAQ:AAPL), the second-largest company in the world by market capitalization, has been bouncing back lately, with its shares rising over 9% year-to-date.
Apple’s iPhone sales fell by 10% year-over-year in the quarter ended March 30, 2024, due to slowing demand in China, its biggest market. However, the company has been taking active steps to boost overseas sales by offering steep product discounts. Interestingly, according to a Bloomberg report, Apple’s iPhone shipments to China rose by 50% in April and by 40% in May.
Apple also approved a $110 billion share repurchase plan last month, marking a 22% increase from the prior year’s $90 billion repurchase plan.
The company hopped on the AI bandwagon by launching Apple Intelligence earlier this month, integrating a custom artificial intelligence system across all its products.
“Our unique approach combines generative AI with a user’s context to deliver truly helpful intelligence. It can access that information privately and securely to help users do the things that matter most to them. This is AI as only Apple can deliver it, and we can’t wait for users to experience what it can do,” said Tim Cook, Apple’s CEO.
Wedbush Securities currently has an “Outperform” rating on Apple, with a price target of $275, indicating a potential upside of nearly 30%.
Shares of Alphabet Inc. (NASDAQ:GOOGL) have risen by over 30% so far this year, shrugging off sentiment regarding a potential slowdown in the field of AI. The company’s better-than-expected earnings report for the fiscal first quarter and its first-ever dividend payout drove share prices significantly. In April, Google’s board of directors approved a $70 billion share repurchase program.
However, some believe that Google has lost ground in the AI war, as evidenced by Rosenblatt Securities’ recent downgrade of GOOGL stock from “Buy” to “Neutral.” This comes as EU regulators inspect Google’s partnership with South Korean phone maker Samsung to embed the former’s generative AI technology into the Galaxy S24 smartphone series.
“We are also sending requests for information to better understand the effects of Google’s arrangement with Samsung to pre-install its small model Gemini Nano on certain Samsung devices,” said Margrethe Vestager, EU competition chief.
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