We recently published a list of the Top 10 Overbought AI Stocks in 2024. Since Apple Inc (NASDAQ:AAPL) ranks 6th on the list, it deserves a deeper look.
The second half of 2024 is here and rate cuts from the Federal Reserve remain elusive, with warnings about valuations and AI-led market hype growing louder. A number of notable Wall Street analysts have recently warned that the markets remains more concentrated than ever where just a few stocks account for most of the gains, thanks to their dominance in the AI industry. Many also believe the market is up for a correction as it has entered the overbought territory. Financial services company BTIG recently said in a report that the world’s fifth-largest exchange-traded fund by assets under management (AUM), QQQ Trust Series 1, now trades “well into” overbought territory based on its Relative Strength Index technical indicator. QQQ tracks the Nasdaq-100 Index and it’s not surprising to see the ETF showing signs of being overbought as more and more investors pile into mega-cap tech stocks in order to ride the AI bandwagon.
For this article we scanned the holdings of the Invesco QQQ Trust Series 1 ETF and picked top technology holdings of the fund with higher Relative Strength Index (RSI) values. Usually, an RSI value of 60 and above shows a stock is overbought. We have also mentioned the number of hedge fund investors with these stocks. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 150
Apple Inc’s (NASDAQ:AAPL) 14-day RSI is over 61, worse than 95.24% of 2921 companies in the Software industry. Apple Inc (NASDAQ:AAPL) is the third-biggest holding of the QQQ ETF, which is also entering the overbought territory based on its RSI metric according to a latest note by BTIG.
Morgan Stanley said in a report last month that Apple Inc (NASDAQ:AAPL) is one of the stocks that could benefit from the rise of AI PCs. Apple Inc (NASDAQ:AAPL) skeptics have long believed that Apple Inc (NASDAQ:AAPL) is a laggard in the AI race, but experts say Apple Inc (NASDAQ:AAPL) almost always makes its own way and Apple Inc (NASDAQ:AAPL) will come roaring back in the AI competition and surpass Microsoft and Alphabet. The first signs of Apple Inc’s (NASDAQ:AAPL) AI capabilities are here. Last month, Apple Inc (NASDAQ:AAPL) revealed new M4-powered iPad Pro and claimed that its devices, powered by Neural Engine, will be “more powerful than any neural processing unit in any AI PC today.” Apple Inc’s (NASDAQ:AAPL) Neural Engine is Apple Inc’s (NASDAQ:AAPL) neural processing unit (NPU) that accelerates AI workloads.
Notable Wall Street analyst and Deepwater Asset Management Managing Partner Gene Munster recently made waves when he said in a post on Twitter that Apple Inc (NASDAQ:AAPL) is a better investment than Nvidia for the long term. Munster believes owning Apple Inc (NASDAQ:AAPL) over the next year will have a higher return because the market is in “denial” about Apple’s AI potential.
Mar Vista Focus strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its first quarter 2024 investor letter:
“Apple Inc.’s (NASDAQ:AAPL) stock was pressured in the quarter as investors fretted over softening demand for smartphones, regulatory action from the US Department of Justice, and the Chinese government mandates restricting iPhone use by government officials. Despite these near-term headwinds, we continue to believe the company remains competitively advantaged and benefits from the Apple ecosystem, which has an installed base of over 2 billion devices and over 1 billion paying subscribers. We believe the Apple ecosystem will support a more predictable cash flow stream, which should grow intrinsic value high-single-digits over our investment horizon.”
Overall, Apple Inc (NASDAQ:AAPL) ranks 6th on Insider Monkey’s list titled Top 10 Overbought AI Stocks in 2024. While we acknowledge the potential of Apple Inc (NASDAQ:AAPL), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Apple Inc (NASDAQ:AAPL) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.