New King vs Old King - NVDA vs Apple
The most important question for Q2
Perhaps the most important question in the market as we enter into Q2 is if the outperformance of NVDA vs AAPL will continue or if it is time for at least a partial reversion to mean. This is not only about the two stocks, but also about the overall AI theme and if growth will continue to crush quality. The incredible chart below shows the NVDA vs AAPL ratio. Will we ever see some mean reversion kick in?
Source: Refinitiv
New vs old king
Two year NVDA vs AAPL chart in %.
Source: Refinitiv
Mighty NVDA
The world's most important stock has produced one thing in March, a lot of volatility, but no trend. This isn't what investors really want to see, especially not after the great melt up. Maybe Q2 will be tougher for this stock.
Source: Refinitiv
Dreaming about >1000
We ask ourselves how much more medium term fundamental upside there is left in NVDA. You can see in this quote from BofA that you need a pretty hefty 2025 multiple to just get to 10-15% upside. "Our $1100 PO is based on 37x CY25E PE ex cash, justified given stronger growth opportunities ahead as gaming cycle troughs and data center demand potentially faces strong, long-term demand dynamics" (BofA)
As goes NVDA...
...goes the market.
Source: Refinitiv
As Apple goes...
...goes the market narrative is dead.
Source: Refinitiv
Apple's Braveheart moment
Buffett to AAPL share price: HOLD! Huge level coming up, AAPL held last time...but this time the death cross (50/200 day) remains in place.
Source: Refinitiv
Double-top in the AAPL supplier basket?
Goldman has an Apple Supplier basket. Top weightings: AVGO: 21% / MU: 12% / TSM: 9% / QCOM: 9% / APH: 8%
Source: GS
Apple is doing fine, but not flourishing
1. All the legal problems...
2. Limited growth....Revenue will increase just over 1% in fiscal 2024, marked by a similar increase in iPhone sales.
3. Where's the AI...? Apple has not indicated much progress with AI, unlike several of its tech peers, which conceptually constrain both sales & story.
The question is of course if "just doing fine" will be good enough for the stock.
Stressed Apple
VXAPL vs VXN gap at rather short term wide levels.
Source: Refinitiv
The Apple drag
"There comes a point in which the downpour of cases and scrutiny that comes with them become a real drag on how these companies operate" says Bill Kovacic, antitrust professor at George Washington University Law School. (Bloomberg).
Apple's AI master plan
What if Apple actually has an AI Joker up their sleeve? The company will hold its Worldwide Developers Conference on June 10. Apple insiders believe iOS 18 will include a revamped version of Siri, AI integrated into iMessage, auto-generated playlists, an AI health coach for watches, and more. WWDC could mark the next defining moment in Apple’s history — and potentially put AI in the hands of billions of new users. (The Rundown)
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