Apple (AAPL) – Get Apple Inc. report just lost a coveted title.
The iPhone maker snatched that crown in 2020 on financial performance that left investors dizzy on strong sales of its hardware — iPhone, Mac, Apple Watch — and a surge in services.
These earnings have continued to grow thanks to the Covid-19 pandemic, which has seen the world stay connected through technological tools. The Cupertino, California-based company had also managed to reassure investors worried about lockdown measures disrupting supply chains and shortages of chips.
No wonder, then, that Apple has overtaken Saudi oil giant Saudi Aramco as the world’s most valuable company. Apple is the first company in the world to break the $3 trillion mark.
Two years later the world has changed. Economies have reopened. Inflation is galloping. Supply chain problems have worsened with new lockdowns in China and rising commodity prices following the Russian invasion of Ukraine. Investors have never feared a recession. And unsurprisingly, the technology sector is paying the highest price.
Apple is no longer the most valuable company in the world
From emerging firms to tech giants, almost no one has been spared. Apple shares are down 17% since January at $177.08. Billions of dollars in market capitalization disappeared.
At the same time, the energy sector is booming. Crude oil prices have soared on supply concerns following Russia’s conflict in Ukraine. Crude Oil WTI is up 46.9% since January. As a result, energy company stocks have risen sharply. That’s true of Saudi Aramco shares, which are up a little over 25% since January.
The Saudi giant announced on March 20 that its 2021 net income rose 124% to $110 billion, compared to $49 billion in 2020. The company benefited from rising oil prices. Brent Crude, the global benchmark, rose almost 80% over the period.
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Saudi Aramco thus seized the opportunity to recapture the crown of the most valuable company in the world. The company’s market cap was $2.382 trillion as of May 13, according to FactSet data, compared to Apple’s $2.381 trillion. Saudi Aramco has held the crown since May 11.
Given the current instability in the markets, it is certain that the two groups will exchange this crown later in the year. Apple CEO Tim Cook warned in his latest quarterly results that the lockdown in China and the war in Russia will cost the company between $4 billion and $8 billion in the current quarter.
“Understandably, Cook would not predict when the supply issues would be resolved. Speaks for how many moving parts are involved. My guess is December 22,” said Gene Munster, co-founder of Loup Funds.
“$AAPL resulted in sales of $83 billion in June compared to $87 billion for Street, primarily due to supply chain headwinds and to a lesser extent FX and Russia.”
Munster added: “The good news is the demand is there, they just can’t keep up with it.”
Apple could use the expected launch of the iPhone 14 in the second half of 2022 to overtake Saudi Aramco, but that would require the company to have control of the supply chain.
Microsoft (MSFT) – Get the Microsoft Corporation Report with a market cap of $1.95 trillion ranks third. The software giants are followed by Alphabet (Google) – Get Alphabet Inc’s Class A report with a market value of $1.53 trillion and Amazon (AMZN) – Get report from Amazon.com, Inc with $1.15 trillion.
Tesla (TSLA) – Get Tesla Inc reportthe electric vehicle maker, ranks sixth with a market cap of nearly $800 billion, despite a tumultuous April due to Twitter’s ongoing acquisition (TWTR) – Get the report from Twitter, Inc by its CEO Elon Musk.
Warren Buffett’s Berkshire Hathaway conglomerate (BRK.A) – Get the Berkshire Hathaway Inc. Class A report Seventh with a market cap of $683.38 billion, followed by Mark Zuckerberg’s Meta Platforms (FB) – Get Meta Platforms Inc. Class A report with $567.85 billion.