Analyst Calls Apple an Undervalued AI Giant, Stock Rises Nearly 3% on Wednesday

Apple Inc shares rose nearly 3% on Wednesday, despite a weaker technology sector, driven by strong large-cap buying. The Nasdaq rose 0.13%, the S&P 500 gained 0.53%, while the technology sector fell 0.6%.

The tech giant is navigating European regulatory changes, shifting investor enthusiasm for artificial intelligence, and rising hardware costs, as investors weigh near-term pressures against the company's potential to build a stronger personalized AI business.

Apple Overhauls EU App Store Terms

Apple agreed to change its European App Store policies to resolve a dispute with EU regulators. Starting October 1, the company will replace its core technology fee with a 5% commission on digital transactions outside the App Store, cut standard in-app purchase commissions in Europe to 26%, and allow developers to offer alternative payment options.

AI Rotation Pressures Apple Stock

Since its record high on July 28, Apple shares have fallen about 10%, as investors rotated toward companies with more direct exposure to AI infrastructure spending.

Jordan McCall, senior portfolio manager at Russell Investments, told Bloomberg that renewed confidence in AI capital expenditures has fueled this rotation.

Clayton Allison, portfolio manager at Prime Capital Financial, said Apple benefited when investors questioned massive AI spending, but its limited infrastructure investment now leaves it with less exposure to the resurgent AI rally. Allison remains bullish on Apple's balance sheet, ecosystem, and share buybacks.

Jefferies analyst Edison Lee is more cautious, citing rising memory costs and the risk that an expensive foldable iPhone may only attract a niche audience.

Munster Sees Siri as Apple's AI Breakthrough

Gene Munster, managing partner at Deepwater Asset Management, told CNBC he views Apple as an undervalued AI opportunity. He believes the company's more conservative AI approach and stronger safety measures could differentiate it from more aggressive competitors.

He called Apple "one of the most undervalued large-cap companies," saying the company is "finally getting Siri right," and that its stock could "re-rate" as the assistant becomes the foundation for personalized AI.

Munster said his testing of the Siri beta convinced him Apple is making meaningful progress. Deepwater research shows that fewer than 20% of U.S. iPhone users use Siri daily, leaving significant room for Apple to expand adoption.

Munster believes Siri could become the foundation of Apple's personalized AI strategy. He expects the company's valuation multiple to rise meaningfully over the next year as investor confidence in Apple's AI direction grows, even if earnings growth only improves modestly.

Apple's price-to-earnings ratio is approximately 35.6x, reflecting a premium valuation. The stock has a consensus Buy rating with an average price target of $329.53.

Jefferies downgraded Apple to Underperform on August 10, cutting its price target to $263.66. China Renaissance downgraded the stock to Hold on August 4, with a target of $280. JPMorgan maintained an Overweight rating on July 31 but lowered its price target to $340.

Top ETF Exposure

Columbia Research Enhanced Core Premium Income ETF: 9.96% weight

iShares S&P 100 ETF: 9.83% weight

Xtrackers Net Zero Pathway Paris Aligned U.S. Equity ETF: 9.57% weight

Significance: Given AAPL's heavy weighting in these funds, any significant inflows or outflows from these ETFs could result in automatic buying or selling of the stock.

Price Action

AAPL stock activity: Apple shares rose 2.88% to $318.96 at the time of Wednesday's data release.