Dan Niles Says Apple Was ‘Incompetent’ With AI, So Why Is The Stock at All-Time Highs?
Dan Niles, founding father of Niles Investment Management, says Apple’s (AAPL) sluggish begin on synthetic intelligence (AI) was an unintentional benefit, at the same time as he flags valuation threat forward of its earnings report this week.
Apple’s inventory not too long ago reached new all-time highs, hitting a report closing value of $336.91 on July 27. This surge pushed Apple’s market capitalization to roughly $4.93 trillion, permitting it to reclaim the title of the world’s most dear public firm from Nvidia. The firm reviews fiscal third-quarter outcomes on July 30.
Apple’s AI Delay Was Actually a Lucky Break
Speaking on CNBC’s Squawk on the Street, Niles mentioned Apple prevented the AI spending spree that has hit rivals’ money move.
“Sometimes you get fortunate for being incompetent,” Niles mentioned, including that Apple was “horrible” at getting AI onto iPhones.
That weak point now seems to be like an edge. Alphabet has raised its 2026 capital expenditure (capex) steerage to $195 billion to $205 billion for AI infrastructure. The spending pushed Alphabet’s free money move destructive within the second quarter, the primary such quarter since its 2004 preliminary public providing (IPO), the method by which a personal firm first sells shares to the general public.
Apple takes a special path. It reportedly pays Google round $1 billion a yr to license a customized Gemini mannequin for Siri’s AI improve. That charge covers a fraction of what rivals spend constructing their very own AI fashions from scratch.
Apple briefly passed Nvidia because the world’s most dear firm earlier this month. Its inventory has stored climbing since, partly on the view that it will probably profit from AI demand with out carrying the balance-sheet threat.
The Valuation Catch
Niles was much less comfy with the place the inventory trades right this moment. Apple’s price-to-earnings (P/E) ratio, a measure of inventory value relative to earnings, sits within the high 30s. That’s properly above the S&P 500’s roughly 22 instances earnings.
He warned that might depart Apple uncovered if Thursday’s numbers disappoint, significantly if rising semiconductor costs squeeze margins. Memory chip prices have surged this yr, a pattern already forcing price hikes across the phone market.
“You can’t put all the cash on the earth into this one inventory as a result of they’re simply not spending on AI,” Niles mentioned. “It doesn’t make sense at a sure valuation.”
Wall Street expects Apple to publish income close to $108.9 billion and earnings per share (EPS) of $1.89 for the quarter, up from $1.57 a yr earlier. Thursday’s report additionally lands in the course of a packed earnings week for Big Tech, with Meta and Amazon reporting the identical week beneath related AI spending scrutiny.
Niles mentioned he plans to remain largely on the sidelines for these names too, citing his personal considerations about capex tied to every.
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