Apple shares rose more than any other Magnificent Seven stock on Tuesday, highlighting how investors are putting their chips on the iPhone maker and shying away from the tech companies spending big on artificial intelligence.
While investors once welcomed Big Tech's announcements of vast spending on AI, they are less confident now. Wall Street is increasingly focused on returns as spending keeps soaring. Software stocks, meanwhile, are taking a beating as investors focus on the possibility that AI could handle tasks now done by specialized programs.
As Barron's has previously reported, collective capital expenditures this year from Microsoft, Alphabet, Amazon.com, and Meta Platforms are expected to be about $650 billion. As spending rises, worries from investors about the returns on those investments have worsened. The Roundhill Magnificent Seven ETF has fallen 11% from its record closing high on Oct. 29, according to Dow Jones Market Data.
Apple stock is up 7.9% over the past 12 months, outperforming hyperscalers Microsoft, Amazon and Meta. Apple rose 3.2% on Tuesday, while Microsoft stock was down 1.1%, Alphabet dropped 1.2%, Tesla fell 1.6%, and Meta declined 0.1%. Amazon closed up 1.2% and Nvidia gained 1.2%.
"People do look at it [Apple] as a safe haven against this big AI spending, this ROI [return on investment] story, just because their capex is relatively low compared to other hyperscalers," said Ryuta Makino, research analyst at Gabelli Funds.
Apple's 2025 capital expenditures were $12.7 billion. Wall Street expects the company to report 2026 capex of $12.9 billion. In comparison, Meta said in January that it expects full-year capex to be between $115 billion and $135 billion.
The fact that Apple hasn't been spending nearly as much on AI as other megacap tech companies wasn't always seen as a good thing. Wall Street has wanted to see Apple push out strong AI updates to its products that could keep existing customers excited and bring in new ones. But instead, the company has delayed the rollout of some of its most highly anticipated AI updates, and its existing AI tech has been underwhelming.
Now, Apple appears to be on course to offer AI products via partnerships with the big spenders. The company said in January that it entered into an AI partnership with Alphabet. The next generation of Apple Foundation Models will be based on Google's Gemini models and cloud technology.
It won't be a smooth road ahead for Apple investors. Margins are at risk because the chips that go into Apple products are getting more expensive as demand for the memory that powers AI outpaces supply. CEO Tim Cook hasn't ruled out raising prices, but that could cut into demand from consumers struggling with a higher cost of living.
The iPhone maker is still lagging behind in terms of the AI it offers, and customers and investors alike need to see updates that excite them. Bloomberg reported on Monday that Apple is holding a product launch on March 4, and is preparing to announce several new devices in the coming weeks. Apple didn't respond to a request for comment on what could be announced.
Wall Street will be looking for any signs of progress on AI. That could add hope for growth to the haven buying now fueling gains in the stock. It's up to Apple to maintain the positive sentiment.
