We recently published a list of 10 AI Stocks on Investors’ Radar In January 2025. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other AI stocks on investors’ radar in January 2025.
Drew Pettit, U.S. equity strategist at Citi Research, said in a latest program on CNBC that he believes the AI growth story is still intact moving ahead in 2025. However, the analyst believes a lot of positive news is already “priced in.” He also mentioned the key areas that can benefit this year.
“I think the fundamental stories, at least for the pick-and-shovels names, continue. But where we think the trade is actually going to broaden out, and honestly, it has since mid-year, is into some of the users of AI. So, think about car companies that do autonomous driving or software companies putting that into their programs themselves, and even to some of the more cyclical names that, on the back end, can get some more productivity gains. So yes, the picks-and-shovels, the enablers of the trade, were attractive for the most part in 2024. We think AI continues to broaden out.”
The analyst said he has done some “reverse DCF work” and believes there are many companies that are mispriced and many that have the good news around them already priced in.
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For this article, we picked 10 AI stocks that analysts are talking about this month. With each company, we have mentioned the number of hedge fund investors. 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).
A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Andy Swan from LikeFolio explained during a latest program on Schwab Network why he believes Apple Inc. (NASDAQ:AAPL) had a strong holiday shopping season:
“Once we saw the September keynote and the reaction that consumers had to that keynote event, we knew that Apple Inc. (NASDAQ:AAPL) was setting up for a really good holiday season. And so far, you know, everything that we’re seeing points to that being true. Web visits for Apple Inc. (NASDAQ:AAPL) are up year-over-year by a pretty decent margin, but when we break it down by product category and look, you know, at the overall demand for each of these types of products, you really get the sense that Apple Inc. (NASDAQ:AAPL), going into the Christmas holiday gift-giving season, just really has something for everyone on your list. If you want to spend $499, you can get an iPad Mini that is extraordinarily popular. The pencil looks like it’s getting added on at a tremendous clip, which is a high-margin item for Apple Inc. (NASDAQ:AAPL). You know, if you want to spend $129, you can get AirPods for your friend or for your niece or whatever it is, and people are doing so in droves. You know, iPad searches up 26%, AirPods and iPhone up 15-16%. The only real whiff we see on the list is the Apple Inc. (NASDAQ:AAPL) Watch.”
Apple Inc. (NASDAQ:AAPL) is desperately in need of new catalysts. The company’s revenue in China fell 8% in fiscal year 2024, following a 2% decline the previous year. The Chinese market accounts for about 15% of Apple’s total revenue, so this downtrend cannot be ignored.
Investors had hopes from the Wearables, Home, and Accessories segment, but so far its performance has been weak. Vision Pro faces tough competition from Meta’s $500 Quest and the more affordable Quest 3S, making it hard to justify its $3,500 price tag. The failure of Apple’s HomePod, unable to compete with Amazon’s and Google’s lower-priced offerings, further highlights the challenges in this market.
Apple’s iPhone 16 has not shown promising growth prospects yet and investors are still in a wait-and-see mode on the AI platform.
While the company is projected to achieve 9.5% EPS growth this fiscal year and 12.3% growth in the next, much of this growth is already priced in, as the stock trades at nearly 30 times the expected EPS for the fiscal year ending September 2026.
Parnassus Growth Equity Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) shares rose during the quarter, making our underweight position a relative detractor. Investors reacted positively to the new iPhone 16 lineup and its advanced features, including generative artificial intelligence, greater durability and increased processing power.”
Overall, AAPL ranks 4th on our list of AI stocks on investors’ radar in January 2025. While we acknowledge the potential of AAPL, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than 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.