Is Apple Winning the ‘AI Scare Trade’?

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2:15Mark Gurman:Another week, another AI-induced panic in the markets.

2:20Sarah Holder:An AI scare trade right now. We saw that sell-off over in the U.S. Another AI scare grips the market. The market is just taking a look around at any possible sector that could be disrupted by AI. Selling first, asking questions later.

2:33Mark Gurman:Part of the reason for this week's sell-off was a thought experiment posted by a research group called Citrini, playing out some of the ways artificial intelligence could disrupt the economy by 2028.

2:45Sarah Holder:Zitrini Research publishing a hypothetical scenario where the agentic AI commerce routing of retail payments upends, apparently, the fee and merchant subsidy businesses of names like American Express, Synchrony, and Capital One. Those names plunging.

2:59Mark Gurman:The hypothetical scenario played into fears that have been rippling through the market for a while. Fears that AI could make entire lines of business obsolete, with consequences for consumer spending, real estate, and financial markets. One of the AI tools getting attention right now is Anthropic's Claude Chatbot, which promises to write code that businesses have traditionally paid programmers or other companies to make. Claude has even caught the eye of the Pentagon, which is pressing Anthropic to give it full access to the technology. On Tuesday, the company released new features that had investors fearing further disruption.

3:37Sarah Holder:We added onto that Anthropic out with an update on Claude that talked about modernizing the COBOL programming language, a dated programming language that IBM uses. And that sent the IBM share price down by 13 percent. And so it prompts lots of questions about where you can hide, if anywhere.

3:51Mark Gurman:And there's a second concern in the market that some of the biggest tech companies that place some of the biggest bets on AI may not have enough to show for it.

4:01Sarah Holder:Most notably, you've seen all of the major hyperscalers, so the companies that are really spending aggressively on AI. This is your Microsoft, Meta, Alphabet, Amazon. The market has become a lot more impatient looking at this spending, wondering when are we going to start seeing this money paying off?

4:20Mark Gurman:Ryan Vlastilica covers tech stocks for Bloomberg. And he says that as the AI scare trade grips the market, there's one company that's been remarkably insulated.

4:31Sarah Holder:Now, Apple manages to be nowhere near either of these central narratives. Right now, if you look at the two major themes in the technology sector, it is concerns about AI CapEx, which Apple isn't doing, and it's concerns about AI-related disruption. And it doesn't really seem like Apple is really in the path of AI disruption in the same way that you would say software companies are or just growing list of companies and sectors are.

4:59Mark Gurman:As most of the Nasdaq has trended down in recent weeks, Apple stock has often moved in the opposite direction.

5:05Sarah Holder:The overall moves of the major indexes aren't dictating the way Apple moves. This has really been visible in days when there has been a lot of AI related angst in the market. things are down pretty broadly, except for Apple, which is up pretty solidly. So we've been describing this as Apple decoupling itself from the broader market.

5:27Mark Gurman:That's something Ryan says hasn't happened to this degree since the days of the iPod.

5:33Sarah Holder:This level of decoupling, we're at a nearly two-decade low.

5:37Mark Gurman:So far, AI jitters don't seem to be hitting Apple as hard as its competitors. And Bloomberg's Apple reporter, Mark Gurman, says, That's a mixed blessing.

5:48Ryan Vlastelica:If you asked Apple six months ago, would you like to be an AI company at the forefront or not, they would say yes. But they're extremely behind, not on purpose, but by accident.

6:03Mark Gurman:I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, Apple and the AI scare trade. Is Apple a safe haven for investors freaking out over AI? And is that a good thing for the company long term?

6:25Mark Gurman:Bloomberg's Ryan Vlastilica says that Apple's decoupling from the Nasdaq is notable because, if anything, Apple has been a longtime market bellwether.

6:35Sarah Holder:I think in a normal kind of environment, when you don't have this sort of AI wildcard, it's pretty common to see Apple moving somewhat more or less in line with the overall market because it has sort of traditional drivers like consumer spending, consumer sentiment, overall growth rates. How, you know, what is GDP doing right now? All those other factors. Now, Apple stock has been a pretty strong performer. That's why it's one of the biggest companies in the world.

7:00Mark Gurman:To understand just how far Apple has diverged from its peers in the Nasdaq, Ryan looks at correlation.

7:07Sarah Holder:Basically, you measure it on a range of positive one to negative one. So positive one would be complete correlation. Two different securities moving in complete synchronicity with each other. And of course, negative one would be complete inverse correlation. Say oil prices and airline stocks. So if oil prices are going up, airline stocks are probably going down. So that would be inverse correlation.

7:29Mark Gurman:And he applied that analysis to Apple.

7:32Sarah Holder:So we charted out a correlation between Apple and the Nasdaq 100, which is primarily composed of these big tech companies. If you want to put a number on it, it fell to a correlation of, I think, 0.21.

7:44Mark Gurman:That's a 40-day average. And that 0.21 from earlier in February was the lowest level since 2006. Ryan says it's bounced up a little since then.

7:55Sarah Holder:Apple is basically no correlation at all, which means it's not really moving on the major themes that are driving the overall index.

8:04Mark Gurman:The big themes like the AI hype cycles and sell-offs. Over the past month, at least, Apple hasn't really been getting caught up in the drama. While the Mag 7 is down about four and a half percent so far in February, Apple is up. That's after underperforming the Mag 7 in the longer term. Ryan says there's a number of reasons for this.

8:26Sarah Holder:It's not a major spender, and it doesn't seem like it's really at risk of AI disruption in the way that some of these other stocks are.

8:33Mark Gurman:But that doesn't mean investors see a bet on Apple as a bet against AI.

8:38Sarah Holder:The fact that you can get all of these AI services on the iPhone, the fact that people will be accessing AI through the iPhone or other Apple products, means that if you are still optimistic about the potential of AI, Apple isn't a terrible way to play that thesis because it is something that could see, as AI proliferates, increased growth, more adoption. People aren't going to start abandoning their phones on account of this issue. As somebody told me, no one is out there vibe coding a new iPhone for themselves.

9:09Mark Gurman:So it's clear that investors are treating Apple as a bit of an outlier right now, but it's not as simple as Apple going up while others are going down. Apple shares have had their own ups and downs even over the past two weeks. They're just out of sync in this way that you're describing. Can this be explained by investors seeing Apple as this kind of hedge against AI bets? Or are they also responding to other kinds of news coming out of the company?

9:32Sarah Holder:I do think a lot of it is Apple's sort of insulation from some of these AI cross currents. Now, I was speaking to someone who basically said the fact that correlation is so low with the broader market does kind of increase its value as sort of diversification within the overall market, especially since you do have this sort of AI upside optionality from the fact that if AI really proliferates and everyone is using it, maybe that means more demand for, you know, the next generation of iPhone or other Apple products like that. So you can use these things on the most advanced hardware that you can get.

10:05Yes.

10:05Mark Gurman:And we'll talk to Mark about some of the ways that Apple is investing in AI moving forward and how its AI bets have gone so far, But I'm wondering why this decoupling matters right now. What does it reveal about how investors are viewing the AI race more broadly? Because these two fears that you laid out, that companies are spending too much on AI or that AI is going to disrupt all these software companies, they feel a little bit in intention.

10:31Sarah Holder:Yes, I think you're right about that. I think there is a lot of concern right now about when are we going to see this pay off? And at the same time, is this going to destroy everything? So those two narratives have been very much present in the market. And you're right that there might be some tension. But I think people, if you're looking around and you're trying to find something that feels like a safe bet right now, Apple is sort of a kind of obvious place, especially within big tech, to look for something like that.

10:57Mark Gurman:Coming up, Bloomberg's Mark Gurman on how a series of missteps and missed opportunities put Apple in this position in the first place. And what the company is doing to catch up on AI.

11:38Sarah Holder:or wherever you get your podcasts. The social media trend that's landing some Gen Zers in jail.