Apple: Questionable Position on Future Tech (NASDAQ:AAPL)

thesis

Apple Inc.NASDAQ:AAPL) is a tech giant looking for future growth, and in my view has yet to find a clear path to achieving it. It has performed well compared to other large tech companies. Over the past few years, however, this may have had to do with aggressive share repurchases and surprisingly resilient earnings. However, I think they are lagging behind in terms of developing technology that will control the bottom line in the next decade. A weak position on these key emerging technologies could have serious implications for Apple’s long-term valuation and make them more of a consumer staple and less of a tech stock. For these reasons I will not open a position here.

The fact is that Pro

Estimates vary, but the AR and VR market could. It will be worth it 856 billion dollars in 2031 with a mammoth CAGR of 41.1%. Apple is about to enter the AR/VR market without even revealing it. Mixed reality headset It is reported to have cost up to $3000. Right off the bat, a price tag like that makes me skeptical even without any specs being released. Unless this experience is not only superior, but completely unchallenged by what competitors have to offer, it’s unclear whether the market at this price point has any meaningful potential. In the current recession, where consumers are cutting back on luxury goods, prices are even more of a concern.

However, the budget model appears to be in the works sometime in 2024-2025. It seems questionable whether this budget model exists in the beginning. Are customers going to buy a $3000 headset as their first entry into Apple’s VR ecosystem? Apple obviously has a strong brand, but I’m not sure. That’s what he said. strong. With VR products, product popularity largely determines the success of the entire ecosystem, so if the first model is a dud, it can sink the entire product line.

Interestingly, however, Apple is developing new software that could better inform their ecosystem of MR applications. The software allows users to do so easily Design applications themselvesCompletely code-free via Siri. This can be a big plus for Realty Pro as it offers a unique selling point and features that help justify its high price tag. The success or failure of this feature could play a major role in the ultimate fate of the reality pro.

This budget MR model comes at the expense of the now indefinitely delayed AR glasses plans. The AR game is especially important for Apple, because AR glasses could be the smartphones of tomorrow. If this happened, Apple would have to establish a dominant iPhone-like market share in order to survive, and would likely be at the forefront of development.

Either way, AR seems like a natural evolution for Apple products. AR glasses have utility in everyday life, similar to smartphones, and it seems easy to bring down the sleekness and aesthetics associated with Apple’s hardware to a pleasing design. This is why the push back of AR development is particularly worrying for Apple in my view.

Apple car

It’s hard to believe, but Apple has been interested in cars for over a decade. It’s called Steve Jobs. The “dream” of creating an iCar. In the year Before his death in 2011. The project has since materialized, but has been plagued by constant setbacks, including the collapse of a partnership with Volkswagen (OTCPK:VWAGY) in 2018. Now, internal emissions were the target. Changed to 2026. And the proposed self-driving capabilities have been pushed back. These red flags aren’t the only reasons why the project is doomed. Self-driving is mainly based on AI technology, and the next part will talk about why Apple is behind it in this case.

AI

I strongly believe that AI will be the dominant technological innovation and, consequently, driver of economic growth in the coming decades. The AI ​​market is predicted to grow. $1.394 trillion by 2029. ChatGPT has generated a lot of hype, but it’s really only the AI ​​model that has gained the most popularity because it’s so accessible to the public. Similarly, impressive AI models are being developed rapidly, but are usually not released publicly. Just last year, for example, DeepMind developed a ‘general’ AI capable of playing many different tasks and games. Gato. When it comes to AI development, Apple seems to be lagging behind competitors in big tech.

Google (NASDAQ:GOOG) has DeepMind, Microsoft (NASDAQ:MSFT) has OpenAI, Meta (NASDAQ:META) has Meta AI, and Apple has… Apple Machine Learning Research. It’s safe to say that Apple’s AI Labs name brand recognition isn’t on the same level as others — it doesn’t matter if the lab seems to be of the same quality as its competitors. Unless, some metrics that don’t seem to matter. The graph below shows the major companies ranked by number of publications. Apple is ranked 13thThIt has landed some big orders, behind many other tech companies but crucially behind leaders, Google, Microsoft and Meta. Now, obviously this is not a perfect proxy for success in AI research, let alone AI research translating into commercially viable products – but it does show which companies are at the forefront of AI research.

Reinforcing this information are the opinions of AI researchers. When AI researchers were asked to rank the top AI labs around the world Don’t tend to choose Apple Of the three, they generally choose Google, Meta and Microsoft (or proprietary laboratories).

Procurement may be the answer.

Apple may be snapping up a lot of new tech companies that are undervalued right now. Instead, they use their higher free cash flow to increase their own share price through stock repurchases. This isn’t inherently a bad thing, it can absolutely be a very sensible strategy, but I worry that you are sleepwalking into slower growth rates in the long run.

Price

Apple trades at a forward and trailing P/E of about 23, as shown below, which puts it at the upper end of the range relative to other large tech companies. However, this premium is probably somewhat justified. Sustainable income Stock repurchase system in Q4 and ongoing. If my expectations for AI are correct, and Apple’s other new tech plays are so mediocre they don’t compensate for that, their relative premium compared to the competition may not be justified.

Wall Street is somewhat bullish on Apple with a view of 168.11, which is a 16.78% increase from its current price. I don’t think it fully reflects Apple’s relatively weak position in new technologies, so lower price targets seem more plausible to me.

Conclusion

Apple is an amazing company with an excellent product line and strong brand loyalty, but I am concerned about their position on the technology they are currently focusing on and the products are very weak compared to the competition. So I expect a lower entry on the stock or alternatively better news on key areas such as AI, VR/AR and Apple’s car project.