Help build Berkshire Hathaway in a company worth nearly a trillion dollars and co-founding the Giving Pledge charity are just a few of the things Warren Buffett is known for.
Despite his prolific career, one thing Buffett isn’t really known for is being a technology investor. Many of his most famous and lucrative investments came from humble financial services and consumer goods companies.
However, Buffett is a staunch supporter of this Apple (NASDAQ: AAPL) for almost a decade. Today, Apple represents Berkshire’s largest position: it comprises about 30% of the portfolio.
Although Apple’s shares have posted significant gains since Berkshire’s initial purchase in 2016, some on Wall Street are calling for an even further rise. Specifically, Wedbush Securities’ Dan Ives has a $300 price target on Apple stock – implying a 32% upside as of the market close on September 24.
Let’s take a look at some catalysts that could fuel Apple stock and assess whether there’s a good opportunity to buy the stock now.
Positive macro indicators
Over the past few years, high inflation and rising interest rates have discouraged the US macroeconomy. Furthermore, as a global company, Apple has also not been immune to some of the factors slowing down other major geographic regions, such as China.
In turn, consumers and businesses have tightened their budgets and spending habits have changed. People have become more price-conscious in recent years and have chosen to forego expensive new iPhones or MacBooks.
However, as inflation shows signs of slowing and the Federal Reserve’s rate cut begins, consumer purchasing power should begin to strengthen.
Did someone say artificial intelligence?
In recent years, several mega-cap tech companies have achieved great success in the field of artificial intelligence (AI). Apple has not been one of these companies.
However, during a recent segment on CNBC, Dan Ives proclaimed that Apple is about to enter a “renaissance.” I agree.
To start with, Apple’s new iPhone 16 hit the shelves last week. As I mentioned above, many users in the Apple ecosystem have not upgraded their devices in recent years. But with signs of economic improvement on the horizon, I think Apple will begin to recognize delayed demand for its new hardware.
Additionally, I think Apple’s recent partnership with OpenAI will provide two additional catalysts for the company.
First, integrating OpenAI’s capabilities into its products contributed to the creation of Apple Intelligence. As the company begins to roll out new AI-powered services, I think consumers will be inspired to upgrade and purchase Apple’s new product line.
Additionally, Ives predicts that the relationship with OpenAI will be just the first in a series of AI-inspired partnerships for Apple. In particular, Ives calls for a deal between Apple and Baidu. Baidu can be seen as the Google equivalent in China. Such a deal could help fuel demand for Apple products abroad, especially in China.
Whether or not a specific deal with Baidu comes to fruition is less important to me. At a higher level, I echo Ives’ thoughts that OpenAI will be just one of many partnerships Apple makes as it finally begins to penetrate the AI ​​market.
All of these factors could set Apple up for what Ives calls a “supercycle.” In my view, Apple’s entry into the AI ​​domain could mark a crucial growth arc for the company.
Should You Buy Apple Stock Now?
One downside to Apple stock is that it’s pricey right now. Currently, Apple’s price-to-earnings (P/E) ratio of 33.7 is significantly higher than Apple’s. S&P500‘s forward price-earnings ratio of 22.9.
Moreover, forward price-earnings trends for the S&P 500 have been normalizing for some time. In contrast, Apple has experienced notable valuation expansion.
I bring all this up because investors need to understand that Apple stock has become more expensive despite its delayed entry into the tech industry’s newest frontier: AI. A good case can be made that some of the AI-driven growth is already baked into Apple’s stock price.
Despite this story, I think the company’s growth thanks to the new iPhone and Apple Intelligence more broadly is too difficult to pin down one way or another right now. For these reasons, I wouldn’t underestimate Apple’s ability to achieve renewed growth thanks to a resilient and recovered consumer.
Long-term, I still see Apple as an attractive opportunity and think shares are worth a look at the moment.
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Adam Spatacco has positions at Apple. The Motley Fool holds positions in and recommends Apple, Baidu, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Meet Warren Buffett’s Best Artificial Intelligence (AI) Stock, Up 32% According to Dan Ives and originally published by The Motley Fool
