Seventh Time Is the Charm: Apple Closes Above $5 Trillion Market Capitalization

Apple AAPL 0.50%increase; up pointing triangle became the second company to close above the $5 trillion mark on Wednesday, capping the Tim Cook era, and posing an implicit challenge to new Chief Executive John Ternus.

The iPhone-maker’s shares closed at a record, just enough to push the company’s market capitalization into territory that only chip colossus Nvidia occupies. Apple’s market value has surpassed $5 trillion six times previously during intraday trading, but it had never closed above that level, which it squeaked past on Wednesday, ending the day at $5.005 trillion according to Dow Jones Market Data.

Cook’s act will be tough to follow. During his 15-year tenure as CEO, which ended Aug. 31, Apple’s market cap multiplied by a factor of 13. He nearly quadrupled the number of iPhones sold annually. He grew its highly profitable services business from $10 billion annually to more than $100 billion. He launched the Apple Watch and AirPods, which together generate more than $30 billion a year. He poured Apple’s cash into more than $1 trillion worth of share buybacks and dividends.

A key to Apple’s success under Cook is how it has limited capital spending, juicing the company’s returns for investors and greatly reducing the risks of its business. That has never been more apparent than during the AI build-out, when big tech rivals have rushed to spend gargantuan sums on data centers while Apple has focused on its core businesses making devices and selling high-margin services for them.

Apple investors are so confident in its business that they have driven up its shares despite big cost increases that threaten profit margins. The cost of memory and storage chips inside iPhones, Macs and iPads has skyrocketed as demand for those chips from data centers has led to shortages. Apple has responded by raising prices across its device lineup, including for older model iPhones that would typically get a price cut.

In theory, such a move could hurt Apple since iPhone buyers might wait longer to upgrade their devices. Yet since the first wave of price increases Apple shares have jumped 25%.

In part, that is because investors think Apple device buyers will pay the higher prices, enabling Apple to generate as much or more in total profits even if margins are down, said Bank of America analyst Wamsi Mohan. He added that Apple’s new foldable iPhone Duo is likely to be popular and that the new Siri AI will prompt iPhone upgrades.

AI has long been viewed as Apple’s Achilles’ heel. The company failed in its efforts to build its own frontier model, and it also allowed its Siri assistant to fall far behind rivals. ChatGPT revolutionized what smartphone users expect from chatbots.

Apple hopes to turn a corner with the new Siri AI. Built with Google’s help, Apple’s redesigned chatbot was released this fall. It still lags behind rival AI systems in key respects, though it has the advantage of being built directly into the device that many people already use, their iPhone. Apple also has access to more personal data, which could theoretically be used for compelling AI features, though new AI agents show the technology is advancing faster than Apple’s ability to keep up.

Tech rivals know how important it is to control the devices that people use to deliver their services. Perhaps most threatening to Apple, OpenAI is planning a family of AI-powered devices. It has poached hundreds of Apple employees to drive its device strategy. Apple responded in July by suing OpenAI, alleging it stole Apple trade secrets.

OpenAI has said it is “not aware of any evidence that this complaint has merit” and alleged in a new legal filing Wednesday that Apple poached one of its own employees who took confidential files with him. Apple said in response that it had found no evidence supporting the new allegation.

AI could be the battleground where Ternus makes his mark, either ushering in a new era of innovation and growth for Apple or finally losing its status as the company that has defined how people interact with computers.