A Costly Bite for an Apple: Apple Inc.’s Value hits $2trn

September 10, 2020


2 min read

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What's going on here?

The value of Apple shares hit $2.3trn on September 1st, placing its value as more than all the collective members of the FTSE 100.

What does this mean?

Apple was valued at $1trn back in 2018. It took 42 years to get to that point. Roll on 2020 and just two years later, Apple has doubled its value. More impressive is that this doubling happened in just 21 weeks amidst a global pandemic and a major economic contraction. This meant that Apple was worth more than all the companies listed on the UK’s FTSE 100, worth £1.5trn collectively. The demand for shares was also boosted by Apple’s decision to divide its shares, swapping one old for four new shares. This made it easier for individuals to invest, and investors have been overly keen. This is because the US tech giants are a safe bet, with many predicting their size, political and financial power will easily weather a recession caused by the pandemic.

What's the big picture effect?

Apple sits on the S&P 500 index which has been hitting all-time highs recently (check out our article on that, here). Arguably, this is largely in part due to investors betting billions on the Tech Giants (Alphabet, Amazon, Apple, Microsoft and Facebook). The only problem is the age-old adage: what goes up must come down. The recent US stock market surge is limited to tech companies and is reminiscent of the Dot-com bubble of the late 1990s. Evidence of these parallels are building. Just three days after Apple hit $2trn, its shares entered correction territory with its valuation dropping to $1.97trn. Analysts believe the sell-off was due to slow service sector growth, record jobs cuts and a larger than expected trade deficit, based on US economic data.

The other surprise is that out of all the tech giants, Apple has been the least innovative in the past few years. But its grip on the mobile phone market means it does not need to; simply tinkering with old creations seems to be a money-maker. New iPhone, where? This is because Apple can call the shots in whatever it does.However, Tim Cook, the CEO, believes that Apple does not have “a zero-sum approach to prosperity.” He went on to state “We are focused on growing the pie, making sure our success isn’t just our success and that everything… we do is geared towards creating opportunities.” Yet, the company’s recent anti-competitive actions – e.g. the banning of Fortnite from the Apple store (read up about that, here) – suggest a different reality for developers dependent on Apple’s ecosystem.

It seems the recent surge in US tech stocks may be ending. A change in the ‘real economy’ of the US could show investors that the rally has overextended itself and moved away from normality. The risks that investors have been ignoring for months are now increasing. Apple has significant financial standing: perhaps it is time it used some of this monetary firepower to return to its roots, the making of cutting-edge tech. The launch of the first iPhone in 2007 now feels like aeons ago.

Report written by Michael Johnson

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