Apple (AAPL -0.24%) has been a tremendous stock to own for decades. But lately, it's been falling behind its competitors. Artificial intelligence (AI) has been a hot theme for tech in recent years, and Apple has been taking a slow and perhaps overly conservative approach to deploying next-gen technologies for its iPhones.
Investors haven't been pleased with the strategy, and the stock has been doing poorly in what's otherwise been a strong year for the markets. As of the end of Aug. 7, the stock was down more than 12% from the start of the year, while the S&P 500 has risen by nearly 8%.
But there have been whispers and signs that the company may be looking to appease investors and make a big move, one that could help it catch up to its rivals in AI. Could a big acquisition be on the horizon for Apple?
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Tim Cook hints at M&A to speed up its AI strategy
There are so many chatbots and AI-powered products and services in the market these days that it can be difficult to keep up. Apple has been playing catch-up, and while it has been introducing AI features for its iPhones, it delayed some until next year, particularly for its Siri assistant. The problem is that by then, it risks falling even further behind its rivals.
But the company does have substantial resources it can put toward a big acquisition to bolster its strategy. As of June 28, the company's cash and marketable securities totaled more than $55 billion. And over the past nine months, it has generated nearly $82 billion in cash from its day-to-day operating activities.
CEO Tim Cook recently said that the company may be willing to put that money to work and that he's open to mergers & acquisitions (M&A). "We're very open to M&A that accelerates our roadmap," he said.
And what was particularly noteworthy was that he may have hinted that even a large deal may be a possibility, stating that "we are not stuck on a certain size company."
Earlier this year, there were rumors that the company was looking into acquiring Perplexity, which has a popular chatbot and would equip Apple with a load of AI talent. While nothing has materialized and nothing may come of it, a move like that could certainly help Apple win over AI investors.
Investors shouldn't be worried about Apple in the long run
Apple has a robust business, a vast ecosystem of products and services, and more than 1.5 billion active iPhone users around the globe. And don't forget its massive cash flow. The company is by no means in imminent danger.
The company has been taking it easy in recent years and has typically been cautious in its growth, opting to make small, incremental changes to its iPhones rather than big, revolutionary ones. But I think that's because it hasn't had to do that or worry about that. Its users are entrenched in the Apple ecosystem, where it isn't easy to just switch to another provider, as doing so would be a significant undertaking.
With AI, however, management may finally be pushed to be a bit more aggressive. And even if it's behind the competition right now, all it takes is one big move or acquisition to change that. I wouldn't worry about Apple in the long run, as the business still looks phenomenal, and with deep pockets, it has plenty of options it can consider.
Should you buy Apple stock right now?
A big acquisition for Apple may or may not happen, and it's risky to invest based on rumors. But as one of the world's largest and most iconic tech companies, this still looks like a good stock to invest in for the long haul.
At more than 30 times its trailing earnings, it isn't all that cheap. And it may be a volatile road ahead for the company, as it has to worry about tariffs. A slowdown in the economy could impact demand for its products as well. But if you're looking for a stock to invest in for the long term (e.g., 10-plus years), Apple can be a great option to consider.
