Why Apple Stock Might Be Spared If an AI Bubble Bursts

With stocks wobbling in the past week over potential AI valuation worries, investors might have noticed that much of the Magnificent Seven has been increasingly choppy while Apple (NASDAQ:AAPL) has acted like a steady rock, holding its ground at around $270 per share. While the positive initial post-earnings reaction has faded, I do think that investors have a lot to look forward to as the strong early demand for iPhone 17 translates into something bigger as we head into the holiday season.

Undoubtedly, expectations for a robust holiday season on the horizon may very well translate into Apple shares ending the year with a bang, even in the face of growing skepticism over AI spend. At this juncture, it’s hard to make of what’s to happen to the high-tech trade as we enter the final stretch.

• Apple (AAPL) has remained steady near $270 per share while other Magnificent Seven stocks face volatility from AI valuation concerns.

• Strong early demand for iPhone 17 positions Apple for a robust holiday season heading into year-end.

• Apple’s measured AI approach and lack of hype may shield it from correction compared to high-beta AI stocks like Nvidia and Palantir.

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However, it certainly seems to feel like a tug-of-war between the bulls, who believe the AI revolution will change the world, and the bears, like Dr. Michael Burry, who made a big short against two of the bigger names in AI. My guess is that Burry’s bearish bets are causing some investors to re-evaluate where they stand at this point in the AI bull market. Such checkpoints, I believe, are never a bad thing. Though an AI correction can happen without a bursting of the bubble kind of market meltdown, I think that some names will be more heavily penalized than others.

For instance, Nvidia (NASDAQ:NVDA) and Palantir (NASDAQ:PLTR) have been big winners, and if the AI trade turns on its head, these names could be faster to fold than the rest of the market. Really, that’s to be expected for hyper-growth stocks that have betas north of 2.2. After a rough few sessions of the two AI stars, one has to imagine that Burry’s big put options are already in the money.

Indeed, with Palantir, the largest of Burry’s bearish bets, tanking another 7% on Thursday, bringing shares down just shy of 16% from its pre-earnings all-time high, one could argue that Burry has already won. Of course, we have absolutely no idea as to whether Burry has cashed out his bets. We can only speculate at this point. But, either way, I continue to view yesteryear’s big winners as having a harsher road ahead.

Meanwhile, Apple’s relative steadiness in the past week, I believe, suggests the former “AI laggard” is ready to lead, not because it’s got the large language model (LLM) to beat, or the most unstoppable superintelligence team. Rather, it’s played the long game on AI and has held off from risking overinvestment in the technology.

If the AI trade does go south from here, I like Apple stock’s prospects, especially given iPhone 17 is doing so well, even without that massive Siri update (which will feature Google’s AI), which is due in spring.

While Apple is a serious player in AI, it’s a name that doesn’t have nearly as much hype as its peers. And with a rock-solid services business as well as a prudent privacy-driven approach to AI that iPhone users are clearly patient enough to wait for (they wouldn’t have been huge buyers of hardware if they weren’t willing to wait for Apple’s take on AI, which I do think will prove better), Apple stock certainly stands out as the Magnificent Seven name that I believe is most likely to hold up once the next AI-driven correction hits.

At this juncture, I believe Apple is well-positioned to achieve the best margins on its AI investments. Its use case-first approach, I think, might be the way to go as AI monetization becomes the next hot topic, if it isn’t already.

For the first half of the year, the “behind in AI” sentiment on Apple has dragged on its stock. However, once the tides turn, perhaps it’s Apple that stands tall as its more-hyped peers backtrack amid AI valuation concerns. Of course, there’s always a risk that Apple stock gets dragged down anyway, but I don’t think the recent resilience in the shares should be ignored by investors.