Apple's investment case now rests on three variables: a tighter, ecosystem-focused approach to AI, iPhone sales that have grown more than 20% year-over-year for three straight quarters, and a valuation one analyst calls fairly priced against the company's free cash flow. Berkshire Hathaway has cut its Apple stake since 2023, even as the shares have returned 1,120% over the past decade.
Apple shares have returned 1,120% over the past 10 years, but the company's investment case now turns on three variables: its restrained AI spending, iPhone demand, and whether the stock's valuation still makes sense.
Apple sits out the AI spending race
The four major AI hyperscalers are on pace to spend close to $800 billion combined on capital expenditures this year as they build out AI infrastructure. Apple's own capex, by contrast, totaled just $6.8 billion through the first nine months of fiscal 2026.
Instead of building a chatbot or a cloud computing division, Apple is folding AI into its existing product lineup under what it calls Apple Intelligence. CEO Tim Cook said on the fiscal Q3 2026 earnings call this month that Apple has built "the world's best hardware to experience AI".
iPhone demand keeps climbing
iPhone revenue grew at a compound annual rate of 8.8% between fiscal 2020 and fiscal 2025. Sales accelerated further this year, rising more than 20% year-over-year in each of the first three quarters of fiscal 2026.
The iPhone still generates more than 50% of Apple's total revenue, and its installed base is at an all-time high as the device approaches its 20th anniversary next year.
Buffett trims his stake as valuation comes into focus
Berkshire Hathaway began cutting its Apple stake in the fourth quarter of 2023, reducing its holding from a peak of 915 million shares to 228 million shares as of March 31 this year. Apple remains Berkshire's largest single equity holding despite the reduction.
Apple shares currently trade at a price-to-earnings ratio of 35, which looks elevated. However, the company is expected to produce $144 billion in free cash flow this fiscal year on $478 billion in revenue, according to sell-side analysts' consensus, at a time when several big tech peers are seeing their free cash flow shrink. One Motley Fool analyst says Apple stock appears to be fairly valued, in his opinion, though he leaves it to investors to decide whether that warrants adding it to their portfolios.
Source: The Motley Fool
Trading involves risk.
Risk Disclaimer
