Apple stock (AAPL) rose an impressive 13% last week, marking its best weekly performance since July 2020. While the Cupertino giant hasn’t yet turned green for the year, it has recouped the losses it accumulated since President Donald Trump announced his “Liberation Day” tariffs on April 2.
In my previous article, I had noted that after woefully underperforming the market in 2025, Apple was due for a catch-up trade with the broader market as well as its Big Tech peers. The rally came faster than I had expected. In this article, we’ll examine whether there’s still heat left in Apple’s rally or if it will fizzle away. Let’s begin by analyzing the factors that spurred last week’s rise.
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The relationsip between Apple and Trump has been quite complex this year. The president singled out Apple for manufacturing its products in India and called upon the iPhone maker to manufacture its products stateside, something experts believe is not possible as it would lead to a significant rise in production costs, pricing out many American consumers.
But Apple seems back in Trump’s good books (at least for now) and during his visit to the White House, CEO Tim Cook announced plans to spend an additional $100 billion in the U.S. over the next four years. Apple had previously announced a $500 billion investment in the U.S. weeks after Trump’s inauguration, and after the latest announcement, its commitment has increased to $600 billion.
Cook and Apple didn’t leave the White House empty-handed, and Trump said that the company will be exempt from future tariffs on chip imports. iPhone imports from India are already exempt from the 50% tariff that Trump has imposed on the world’s fourth-largest economy, and the exemption from the proposed chip tariffs takes away some further uncertainty.
Apple was due for a catch-up trade, and the White House optics were just the kicker it needed to decisively reclaim its $3 trillion market cap. Apple has also been able to address some of the other issues that have been putting pressure on its stock price.
The company’s sales in China gained traction in May and June, and even though it was partially on account of its subsidy scheme, the company has done relatively well.
Apple has also stepped up its game in artificial intelligence (AI) and has released 20 Apple Intelligence features so far. During the fiscal Q3 2025 earnings call, Cook alluded to an “exciting road map ahead” for new AI products and touted the possibility of a major acquisition to complement its AI capabilities.
While Apple still does not seem to be on the same footing in AI yet as some of its Big Tech peers, the company made its intention quite clear during the fiscal Q3 earnings call. Separately, at an all-hands meeting, Cook reportedly said that AI is an opportunity as big as the internet and emphasized, “Apple must do this. Apple will do this. This is sort of ours to grab.”
Another headwind for Apple has been concerns over the Services business after District Judge Yvonne Gonzalez Rogers ruled that Apple needs to loosen its stringent App Store rules and stop collecting fees on purchases made outside apps.
Apple implemented the changes only in the June quarter, and going by the company’s guidance for the current quarter, where it expects Services revenues to rise in the same ballpark as the June quarter (13% year-over-year growth), so far, that business does not seem to be witnessing any noticeable impact.
That said, it is something Apple management has its eye on. Responding to a related question from an analyst during the Q3 earnings call, CFO Ketan Parikh said, “we’ll continue to monitor the effects on our business, but we’ll continue to innovate and ensure that the App Store delivers the best experience for users and remains a great business opportunity for developers.”
Overall, I would argue that Apple looks in a much better place now than where it was a couple of weeks back.
All the above-mentioned issues raised a serious question mark over Apple’s ability to command a forward price-earnings ratio of around 30x, especially as the company’s earnings growth is expected to be in single digits in 2025 as well as 2026.
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I would argue that Apple has seen the bulk of the expected rerating now and the catch-up trade will soon fizzle away.
The next rally will likely come from an impressive moves that Apple makes in its AI strategy. While these are still early days, given the deft maneuvering Cook and Co. have done in rejigging the supply chain and getting back in Trump’s good books, I would keep betting on Apple finally getting its AI act right.
On the date of publication, Mohit Oberoi had a position in: AAPL, GOOG, META. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
