Apple hits $4.93T valuation despite 'incompetent' AI start—but risks high valuations

Apple's stock hit a record closing price of $336.91 on July 27, pushing the company's market capitalization to roughly $4.93 trillion（約790兆円） and allowing it to reclaim the world's most valuable public company title from Nvidia. This surge comes ahead of Apple's fiscal third-quarter earnings report on July 30.

According to Dan Niles, founder of Niles Investment Management, Apple's slow adoption of AI technology has paradoxically become a competitive edge. Speaking on CNBC's Squawk on the Street, Niles observed that "sometimes you get lucky for being incompetent," noting that Apple was "horrible" at getting AI onto iPhones. This weakness, however, insulated the company from the massive capital expenditure commitments that have strained competitors' finances. Apple reportedly pays Google around $1 billion（約1600億円） a year to license a custom Gemini model for Siri's AI upgrade—a fraction of what rivals spend building their own AI infrastructure from scratch.

The contrast with competitors is striking. Alphabet raised its 2026 capital expenditure guidance to $195 billion（約31兆円） to $205 billion（約33兆円） for AI infrastructure, and the spending pushed Alphabet's free cash flow negative in the second quarter—the first such quarter since its 2004 IPO. Apple, by avoiding large-scale AI spending, has maintained stronger free cash flow relative to its peers, allowing it to benefit from AI-driven market enthusiasm without carrying the same balance-sheet risk.

Niles, however, expressed caution about Apple's current valuation. The company's price-to-earnings ratio sits in the high 30s, well above the S&P 500's roughly 22 times earnings. He warned that this elevated multiple could leave Apple exposed to disappointment, particularly if Thursday's earnings report misses expectations or if rising semiconductor prices squeeze profit margins. Memory chip costs have surged this year, a trend already forcing price hikes across the phone market. Wall Street expects Apple to post revenue near $108.9 billion（約17兆円） and earnings per share of $1.89 for the quarter, up from $1.57 a year earlier. "You can't put all the money in the world into this one stock because they're just not spending on AI," Niles said. "It doesn't make sense at a certain valuation." He indicated plans to remain largely on the sidelines for other major tech names as well, citing concerns about capital expenditure tied to each. Thursday's earnings report arrives amid a packed earnings week for Big Tech, with Meta and Amazon reporting the same week under similar AI spending scrutiny.

Apple's ascent to the world's most valuable company reflects a counterintuitive advantage: by moving slowly on AI development, the company avoided the capital-intensive spending spree that has strained rivals' balance sheets. While Alphabet and other hyperscalers (large technology companies providing cloud services and AI infrastructure) have committed vast sums to building proprietary AI models from scratch, Apple took a licensing approach—paying Google around $1 billion（約1600億円） annually for a custom Gemini model. This strategic difference becomes stark when comparing capex trajectories: Alphabet's 2026 guidance of $195 billion（約31兆円） to $205 billion（約33兆円） for AI infrastructure pushed the company's free cash flow negative in Q2, a historic marker for a firm that had maintained positive free cash flow since going public in 2004. Apple's lighter balance-sheet burden, combined with broader AI-sector enthusiasm, has propelled its stock to record highs.

Yet investor Dan Niles cautions that the stock's current valuation may not reflect this structural advantage sustainably. Apple's price-to-earnings ratio sits in the high 30s—significantly above the S&P 500's roughly 22 times earnings—leaving limited margin for earnings disappointment. The body notes that rising memory chip costs, already forcing price hikes across the phone market, could compress margins further. Thursday's fiscal third-quarter earnings report, arriving amid a packed earnings week for major tech firms and semiconductor sector scrutiny, will test whether the market's confidence in Apple's AI-light model and strong topline growth can justify the premium valuation Niles now views with concern.

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