Apple's stock has become the least connected to the broader market among the "Magnificent Seven," with a 100-day correlation to the S&P 500 of just 0.24, the lowest of any megacap tech name. DataTrek Research says the iPhone maker's cautious approach to artificial intelligence spending has decoupled its stock from both its Big Tech peers and the broader market.
Apple decouples from the broader market
Apple's stock is moving increasingly independent of both its Big Tech peers and the wider market, according to a Wednesday note from Jessica Rabe, co-founder of DataTrek Research. Over the trailing 100 trading days, Apple's correlation to the S&P 500 stood at just 0.24, the lowest among the Magnificent Seven. Nvidia and Tesla posted correlations of 0.67 and 0.66 respectively over the same stretch.
As a result, broader market returns explain only 6% of Apple's performance, against nearly half of Nvidia's and Tesla's moves over the same stretch, DataTrek found.
A go-slow AI strategy pays off
While Microsoft, Amazon and Alphabet pour hundreds of billions of dollars into capital expenditures for AI initiatives, Apple has held back. Earlier attempts to roll out Apple Intelligence in 2024 largely fell short, leading many to see the company as an AI laggard.
But that caution appears to be insulating the stock. According to Rabe: "the market fully appreciates its go-slow AI strategy".
Nvidia shares have dipped 2% since the start of the week amid a broader selloff in the chip sector. Apple shares have remained unaffected, rising nearly 4% over the same period.
Diverging from cloud and chip peers
Apple's returns are also decoupled from the biggest cloud providers. Its daily return correlation is negative 0.07 relative to Amazon and 0.03 relative to Alphabet, DataTrek said, reflecting what Rabe described as a business built on hardware and services rather than cloud infrastructure or ad-supported platforms.
Shares of Apple are up 16% so far this year, the second-best performance among the Magnificent Seven behind Nvidia's 17% gain, though the two stocks' moves stem from different drivers. Rabe added that adding a stock with essentially no correlation to the index can improve a portfolio's risk-return profile.
A hardware base built for future AI
By focusing on hardware instead of chasing emerging AI technology, Apple has grown its installed base to over 2.5 billion active devices, Rabe said, giving the company a distribution network to monetize on-device AI features later on. The Magnificent Seven — Alphabet, Apple, Amazon, Meta Platforms, Microsoft, Nvidia and Tesla — make up roughly a third of the S&P 500 index.
Source: MarketWatch.com
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