In This Article:
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Apple is falling behind in the artificial intelligence field, and the business is growing slowly.
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ASML and Taiwan Semiconductor can benefit from increased spending on AI computer chips.
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Both semiconductor-related companies are projected to grow faster than Apple this year.
Apple (NASDAQ: AAPL) has been a huge winner in the smartphone era, which it pioneered with the iPhone. Now, it looks to be at risk of falling behind in the age of artificial intelligence (AI), cloud computing, and mixed reality. The tech giant failed with the launch of its Vision Pro product and has struggled to release any products related to consumer AI while the competition pushes ahead aggressively.
It is time to forget Apple stock. Here's why you should buy two AI beneficiaries, Taiwan Semiconductor Manufacturing (NYSE: TSM) and ASML (NASDAQ: ASML), for your portfolio instead.
Revenue growth has been stagnant at Apple for many years now. The iPhone is maturing, and while it is still a great product, there are only so many dollars floating around the world that can be dedicated to buying a smartphone. In the last decade it has released some successful ancillary products such as the Apple Watch and Air Pods, but these are not large enough to move the needle for a company with a market capitalization of $3 trillion.
Management claims the company has not been resting on its laurels, but the results so far have been underwhelming. The iPhone is increasingly similar with each yearly update, minimal AI features have been added to its branded "Apple Intelligence" products, and the Vision Pro virtual reality headset was a flop. Other big technology companies such as Alphabet, Amazon, and Meta Platforms are pushing ahead with these cutting-edge technologies, leaving Apple in the dust.
Unsurprisingly, Apple's revenue growth has slowed down quite a bit as a result. This year, analysts project just 4% revenue growth for the technology giant, which will mostly come from software and services revenue. The stock trades at an expensive price-to-earnings ratio (P/E) of 31 even though it is barely growing anymore. This leaves much to be desired with the stock's valuation. There is not much upside to owning Apple stock today versus other fast-growing technology players around the world.
Speaking of fast-growing technology companies, we have ASML and Taiwan Semiconductor Manufacturing (TSMC, for short). These are two players in the computer chip and semiconductor supply chains -- suppliers to Apple, it should be noted -- that are benefiting immensely from the rising spend on AI.