The markets are gotten off to a red-hot start so far in 2024. For technology businesses, euphoria surrounding the artificial intelligence (AI) narrative is helping fuel bullish sentiment across the industry at large.
But one company that is historically known as a genius marketer and product innovator appears to be lagging. Apple (AAPL +0.73%) stock is down roughly 12% so far this year, and the stock is close to its 52-week low.
Let's break down what is going on at Apple. Is now an opportunity to buy a mispriced and potentially undervalued stock? Or should investors steer clear in the midst of Apple's falling price action?
NASDAQ: AAPL
Key Data Points
The innovator's dilemma
When it comes to innovation, it's hard not to include Apple in the discussion. The company has disrupted communications, entertainment, and even healthcare through its long roster of ubiquitous products, including the iPod, iPhone, and iWatch.
But in recent years, Apple hasn't brought much to life in the way of new products. Last month the company sent shockwaves around the tech sector when it announced that it was abandoning its efforts in electric vehicles (EV).
Over the last 18 months, competitors such as Microsoft, Amazon, and Alphabet garnered significant attention in artificial intelligence (AI). But Apple was curiously left out of these discussions for the most part.
Now, with EV's off the table and a seemingly coy posture in the realm of AI, investors have begun raising questions about where Apple is heading.
Image Source: Getty Images
Apple is late to the party, and it's not the first time
Microsoft kicked off the AI revolution when it announced a multi-billion investment in OpenAI, the developer of ChatGPT. Amazon and Alphabet swiftly followed, as each partnered with a competing platform called Anthropic. Of course, Nvidia has been the poster child for AI, as demand for the company's graphics processing units (GPUs) and data center services is off the charts.
In the aftermath of the abandoned EV project, investors looked for answers regarding Apple's position in the AI discussion. While the company briefly took the spotlight away from its peers following an acquisition of a start-up called DarwinAI, this attention was fleeting at best. Details surrounding the DarwinAI acquisition were sparse, further frustrating investors who wanted to know how Apple would play a role in the AI movement.
Apple may have missed the boat -- and this isn't the first time. Unlike Microsoft, Amazon, Alphabet, and even Oracle, Apple completely missed out on the massive opportunities in cloud computing.
Now, as the company's AI ambitions remain nothing more than a giant puzzle, it seems as if investors may be reaching their limit with the iPhone maker.
Buy the dip?
Among the "Magnificent Seven" stocks, only Apple and Tesla are down so far this year. Furthermore, over the last year, Apple stock is up a measly 3%.
My concern with Apple is that the company appears directionless and without a sense of urgency. The competition is investing aggressively in many different facets of artificial intelligence (AI), which could ultimately render Apple a forgotten name in the tech arena.
I see a couple of opportunities for Apple investors right now. If you're an existing holder of the stock, now could be a chance to use dollar-cost averaging to lower your cost basis. The caveat here is that your conviction should still be high. Otherwise, buying the stock simply because it dipped isn't a prudent strategy.
Given Apple's rich history of product innovation, it's hard to turn your back on the company for good. But at nearly 26 times forward earnings, the stock is too expensive for me given the amount of question marks surrounding its growth roadmap.
I'd shy away from Apple stock if you're looking for exposure to artificial intelligence (AI) opportunities. There are plenty of other proven, established players in the market. I think the best option is to monitor Apple's position in AI, and keep an eye out for any developments in terms of strategic partnerships or new products and services.
