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Apple (NASDAQ:AAPL) got off to a rough start to the year, as skeptics slammed the iPhone maker for a lack of an AI strategy. Things have changed in a big way since Apple’s stock bottomed out in the midst of the post-Liberation Day selling across markets. Since then, shares of Apple have gained more than 52% and Apple Intelligence hasn’t really gotten a whole lot better since its initial release, at least in my opinion.
Perhaps it’s more to do with the change in how investors now perceive the firms swinging wildly for the fences on AI. While Apple still has some grand AI plans for 2026, it seems like Apple’s patience and discipline to ensure that it doesn’t get too far ahead of its skis on spending is now finally being appreciated by the market. The big AI spenders really boomed, but then they went bust. And as they took a hit to the chin amid AI bubble chatter, Apple held steady, even rallying in the face of extreme tech-concentrated selling.
Apple stock looks like it’s in breakout mode
With shares of Apple recently hitting a new high on Monday’s session, passing the $4 trillion market cap mark again, perhaps there’s reason to believe Apple shares are getting an upside correction now that investors are seeking to steer clear of those much-heavier AI spenders on the year amid growing concern that investments won’t yield a profit soon enough to keep many investors sticking around as fears and tensions surrounding the technology rise.
Undoubtedly, Apple was seen as too slow in the AI race at the start of the year. Now, it feels like it’s moving at a pace that’s just right. With a fantastic AI deal in place with Alphabet (NASDAQ:GOOG) Google to use its Gemini model in the Apple ecosystem, Apple seems to be getting the very best that AI has to offer on the cheap. Undoubtedly, Gemini 3.0 just launched, and it’s been met with rave reviews.
In fact, it was so good that Salesforce (NYSE:CRM) CEO Marc Benioff sounded blown away over the “insane” leap in reasoning, speed, images, video, and all the sort. As the tech heads to Apple, I do think that the forces propelling Alphabet shares higher might spread to Apple once its Spring update puts the power of Gemini in the hands of its billions of users. While the AI deal is a huge win for Google, I’d argue it’s an even bigger one for Apple. Why?
The AI deal with Google might be an even bigger win for Apple
First, Apple is getting a great deal, paying just $1 billion per year to use the profound, game-changing technology. That’s far less than the $20 billion Google is paying to Apple to simply make Google the default search option in Safari. Undoubtedly, Apple seems to be able to get the sweet deal that few others can pull off.
Second, Siri is pretty much leap-frogging to the very front of the AI race once that big Gemini update lands. The experience could change for Apple users, and that could spark a massive upgrade cycle that many pundits have struggled to time.
Finally, it’s not like Apple is just outsourcing AI to Google; it’ll be supporting, growing, and evolving alongside the powerful new model. With Apple leveraging its Private Cloud Compute to run the models, Apple users also stand to get another level of privacy. And as Apple works on on-device AI while seeking to advance the total package (Gemini playing alongside Apple’s innovations) on its own, the company might have been given a shot in the arm in AI.
In other words, Apple isn’t reinventing the wheel that is AI; it’s buying the wheels from Google on the cheap, and it’ll make good use of the wheels in a way that no other firm can.
The bottom line
While I was skeptical of Apple’s hefty 36.9 times trailing price-to-earnings (P/E) multiple, I now think it’s too low when you consider the low-risk AI catalysts ahead ($1 billion per year for Gemini is a bargain), the potential for a device supercycle, and the ability to win the AI ROI race.
Given the catalysts, a 40 times P/E might be deserved, especially after witnessing Apple stock’s steadier relative footing during that November AI correction. Perhaps Apple is a premier defensive play as well for those who want to bet on AI monetization prospects, rather than just sheer spend, which is now perceived as a negative on Wall Street.