Analysts Cautious on Apple (AAPL) as AI Push Fails to Justify Premium Valuation

We recently published a list of 10 AI Stocks Investors Are Monitoring After Tariff Shock. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other AI stocks investors are monitoring after tariff shock.

The tariff wars and a potential slowdown in AI spending threw water on investors’ AI trade plans and outlook. However, many analysts believe the broader outlook of the industry is still strong.

Ben Bajarin, Creative Strategies CEO, in a latest program on CNBC explained why he is still bullish on the Jensen Huang-led AI giant:

“I think when you look at the technology roadmap … in terms of what they’re doing with Grace Blackwell and Blackwell systems going forward, it’s going to be very, very hard for others to compete. I think they were extremely bullish about how much of the industry—not just the traditional, you know, cloud servers but AI factories and this entirely new infrastructure—and how it is being kind of redeveloped for the AI era. Like, it’s not being built on other things. And so I think when you look at the ecosystem that’s grown around them, they’re deeply entrenched. It doesn’t have any sign of that changing.”

Bajarin said that he sensed “frustration” in Jensen Huang’s tone as the executive feels Wall Street is not modeling the growth potential his company’s AI products truely have.

“And he seems to think that nobody is modeling that in or really understands it. So there’s the—we kind of have a sense of what they’ll sell just product-wise here in 2025, which is where I agree with you. Hard to surprise to the upside to move the stock, but I think he is signaling people don’t understand the magnitude of this opportunity. And I think that’s worth unpacking because there is a lot of growth ahead.”

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

For this article, we picked 10 technology stocks Wall Street is closely watching these days. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Investors: 158

Erik Woodring, an analyst at Morgan Stanley, said in a latest program on CNBC that while the impact of the latest tariffs on Apple Inc. (NASDAQ:AAPL) is not yet clear, he sees an impact on the company’s volumes and margins if the iPhone maker has to raise its prices:

“How much of an impact is that going to have? We just don’t necessarily know. There’s a lot of unknowns right now. This is a time where we as analysts try to do our best to make predictions about whether it’s volumes, pricing, or margins. But at the end of the day, I think there has to be, even for a company like Apple, a pretty significant cut simply because the great unknown still exists.

When you look at the way stocks are moving today and think about us as consumers, if my iPhone, my MacBook, or any other product is 15, 20% more expensive, am I really going to buy it, or am I going to wait and determine if maybe there is some relief in the future? You just don’t know that.”

Apple’s last quarterly results were helped by Services revenue in the latest quarter, but the key challenges haunting the company remain as they were. Many analysts believe that just a few AI apps would not be enough to trigger a broader upgrade cycle for iPhone. Apple is dealing with currency headwinds as the stronger US dollar is expected to reduce top-line growth by 2.5% next quarter. For Q2 FY2025, management expects overall revenue to grow in the low to mid-single digits. Apple’s stock is trading at a premium valuation, with a price-to-earnings ratio of 39-40x, a price-to-free-cash-flow ratio of 33-34x, and a PEG ratio exceeding 3x. Upcoming quarters would be difficult for Apple and its current valuation is not justified.

Columbia Seligman Global Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:

“The fund maintained a position in Apple Inc. (NASDAQ:AAPL) throughout the quarter through the release of the company’s new iPhone 16 in September. Company leaders were excited about the release of the new model, as this is the first model that will feature enhanced AI capabilities through the Apple Intelligence features. Sales for the first few weeks in October and November trailed behind year over year sales from the iPhone 15, as availability of Apple Intelligence was not compatible with all iPhone models. Apple announced a partnership with OpenAI that has allowed the integration of ChatGPT into the Apple ecosystem, separate from the core Apple Intelligence features. This partnership highlights continued progress from Apple to introduce AI capabilities into its products and we expect the iPhone 17 to have even more expansive AI capabilities, increasing potential demand for the new model that is on track to be released in 2025.”

Overall, AAPL ranks 4th on our list of AI stocks investors are monitoring after tariff shock. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter tim eframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.