(Bloomberg) — Apple Inc. is drawing interest from hedge fund investors seeing potential for AI-linked upgrades to its iPhones and as a slump in its shares reduces the stock’s valuation premium, JPMorgan Chase & Co. analysts say.
Most Read from Bloomberg
The technology giant’s shares have fallen 13% this year, badly trailing the broader market. The company is grappling with weak sales in China and a Justice Department suit accusing Apple of violating antitrust laws, taking aim at its lucrative services business. Shares edged higher on Thursday.
Apple is seen as trailing peers when it comes to artificial-intelligence offerings and the company has been looking for partners like Google to add AI features to its iPhones. This prospect is also boosting sentiment as there’s growing appetite for AI-led iPhone enhancements, according to JPMorgan.
“Hedge fund investors are increasingly warming up to the opportunity of the AI upgrade cycle,” although questions remain around whether that will kick in with iPhones to be introduced later this year or in 2025, analysts led by Samik Chatterjee wrote in a research note Thursday.
Chatterjee, who has an overweight rating on the company, said “hedge funds are eyeing the headwinds to create more tactical entry point ahead of the AI upgrade cycle.”
Apple now trades at about 24 times forward earnings, a discount to megacap peers such as Microsoft Corp. and even a little cheaper than the tech-heavy Nasdaq 100 benchmark, according to data compiled by Bloomberg.
“Our conversations indicate that investors are waiting for further recalibration of the near-term estimates, which in their view will be accompanied by setting up an even more attractive valuation multiple as an entry point heading into the AI upgrade cycle,” Chatterjee wrote.
(Updates to add stock move in second paragraph.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
