While other 'Magnificent Seven' companies spend big on AI, Apple's more conservative strategy has turned the stock into a valuable portfolio hedge against volatility
While broad market sentiment drove almost half the daily price action in Nvidia and Tesla over the last 100 trading days, it dictated just 6% of Apple's performance, according to an analysis.
The "Magnificent Seven" stocks - Alphabet, Apple, Amazon.com, Meta Platforms, Microsoft, Nvidia and Tesla - make up roughly a third of the overall S&P 500 index.
But as the artificial-intelligence trade progresses, these megacap tech stocks are increasingly diverging in performance. And one name in particular is peeling away from the broader group as a standalone winner: Apple $(AAPL)$.
The iPhone maker is the least-correlated Big Tech stock to both its peers and the rest of the S&P 500 SPX, according to a Wednesday note from Jessica Rabe, co-founder of DataTrek Research.
"If we had to pick one stock just based on this data, it would clearly be Apple," Rabe wrote. "Its low correlations to the market and every other Big Tech name tell us that the market fully appreciates its go-slow AI strategy.
"Adding a stock with essentially no correlation to the index should improve a portfolio's risk/return profile," Rabe added.
Shares of Apple are up 16% so far this year, making them the second-best Magnifcent Seven performer behind Nvidia (NVDA) shares, which are up 17%. However, the two companies' stock movements are influenced by different factors. Shares of Nvidia have dipped 2% since the start of the week amid a broader selloff in the chip sector, while Apple shares have remained unaffected, rising nearly 4% over the same period.
Over the trailing 100 days, Apple's correlation to the broader S&P 500 was just 0.24, the lowest among the Magnificent Seven. In comparison, Nvidia and Tesla $(TSLA)$ had market-return correlations of 0.67 and 0.66, respectively. That means broader market returns explain only 6% of Apple's performance, while explaining nearly half of Nvidia and Tesla's, according to DataTrek.
Additionally, Apple's performance is decoupled from that of the biggest cloud providers, Amazon (AMZN) and Alphabet $(GOOGL)$ $(GOOG)$. With a daily return correlation that's negative 0.07 relative to Amazon and 0.03 relative to Alphabet, Apple's stock has a near-zero relationship to these names.
Apple's "business is built on a consumer hardware and services ecosystem rather than cloud infrastructure or ad-supported platforms," Rabe wrote. "And, of course, it is charting a very different path with respect to its AI strategy."
Analysts have speculated for months that Apple could be one of the most resilient Big Tech names. While Microsoft $(MSFT)$, Amazon and Alphabet pour hundreds of billions of dollars into capital expenditures for AI initiatives, Apple hasn't participated in the same level of spending. Earlier attempts to roll out Apple Intelligence back in 2024 largely failed, leading many to see the company as an AI laggard.
But Apple's "go-slow" strategy comes in handy on days when investor concerns about AI overspending flare up, insulating the stock from downturns that hit the semiconductor space.
By focusing on its hardware products instead of chasing emerging AI technologies, Apple has grown its installed base to over 2.5 billion active devices. As a result, the company now has an unrivaled distribution network to monetize on-device AI features down the road.
Apple's "continued dominance in high-end smartphones means it will be able to monetize any truly useful consumer AI products," Rabe wrote.
-Christine Ji
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