As Apple becomes the first company to join Nvidia in $5 trillion club, here's the big 'iPhone message' from investors

Apple has become the second company after Nvidia to close with a market value above $5 trillion, underscoring investors’ continued faith in the iPhone maker despite the growing conversion over increasing hardware costs, AI competition and slowing growth. According to a report by Wall Street Journal, Apple ended trading a market capitalisation of about $5.005 trillion, making the first time the company has finished a trading session above the $5 trillion threshold. The milestone caps the tenure of former CEO Tim Cook, who oversaw a 13-fold increase in Apple’s market value during his 15 years at the helm. While, the rise of Nvidia has been fuelled by the AI boom and massive data centre sending, Apple’s ascent reflects something different: investor confidence in the resilience of its ecosystem and, most importantly, the willingness of iPhone users to continue paying more for Apple devices.The investor message: confidence despite cost pressureInvestors are so confident in Apple’s business that they have pushed up its shares even as big cost increases threaten profit margins. The cost of memory and storage chips inside iPhones, Macs and iPads has soared because data-center demand has caused shortages. Apple has responded by raising prices across its device lineup, including for older iPhone models that would typically get a price cut.In theory, that could hurt Apple, since buyers might wait longer to upgrade. Yet Apple shares have jumped 25% since the first wave of price increases.Bank of America analyst Wamsi Mohan said investors believe Apple’s customers will pay the higher prices, letting the company earn as much or more in total profit even if margins fall. He added that the new foldable iPhone Duo is likely to be popular and that the new Siri AI should prompt upgrades.Tim Cook’s recordCook’s act will be tough to follow. During his 15-year tenure as CEO, which ended Aug. 31, Apple’s market capitalization grew 13-fold. The company nearly quadrupled its annual iPhone sales. Its services business grew from $10 billion a year to more than $100 billion. The Apple Watch and AirPods, which he launched, together generate more than $30 billion a year. Apple also returned more than $1 trillion to shareholders through buybacks and dividends.Apple shares trade at a premium to the S&P 500 even though its revenue is growing more slowly than the index average. Analysts say that is because investors see the shares as safe and the business as predictable. A key to that has been limited capital spending, which boosts returns and lowers risk. That has been especially clear during the AI build-out, when big tech rivals have rushed to spend huge sums on data centers while Apple has stuck to making devices and selling high-margin services for them.AI remains the challengeAI has long been seen as Apple’s Achilles’ heel. The company failed to build its own frontier model and let Siri fall far behind rivals. Apple hopes the new Siri AI, built with Google’s help and released this fall, will change that. It still lags rival AI systems in key respects, but it is built directly into the iPhone, which many people already use. Apple also has access to more personal data, which could in theory power compelling features, though new AI agents show the technology is advancing faster than Apple can keep up.OpenAI threat and legal fightPerhaps the biggest threat is OpenAI, which is planning a family of AI-powered devices and has poached hundreds of Apple employees to drive its hardware strategy. Apple sued OpenAI in July, alleging it stole trade secrets. OpenAI has said it is “not aware of any evidence that this complaint has merit.” In a new filing Wednesday, it alleged that Apple poached one of its own employees, who took confidential files with him. Apple said it found no evidence supporting that allegation.AI could be where Ternus makes his mark, the Journal said. He could usher in a new era of innovation and growth, or Apple could finally lose its status as the company that defines how people interact with computers.You use AI every day. Now get your AI Quotient. Take the AIQ test.