Is Apple (AAPL) Stock a Risky Investment?
I think that for a majority of investors, the answer to this question would have been no before last week. But did something fundamentally change for Apple? Earlier in the week, it surfaced that the Chinese government was issuing a ban on iPhones for its government officials and staff. This is the headline that made it to America which of course, caused a massive sell-off for Apple’s stock.
But remember, don’t always believe everything you read on the internet. The truth is, this ban has been in place for a couple of years now and isn’t just limited to Apple phones. So when you hear it like that, is this really a big deal? As with most dramatic stock moves, the 6.0% sell-off this week of Apple’s stock was likely an overreaction.
This does raise an interesting point though: Is Apple too reliant on China? China is the largest consumer market for Apple outside of the United States and over half of its products are manufactured there. For phones over $600, the iPhone dominates the market with a 65% market share. Chinese consumers love Apple products.
When the Chinese government moved to ban iPhones, it was also a political gesture against the United States. Many guessed that in retaliation, the United States would ban Chinese apps like Tik Tok and even Temu. So far none of this has transpired but don’t be surprised if it does happen in the near future.
Apple Looks to Other Markets, Which is a Good Thing
Earlier this year, Apple officially entered the world’s second-most populous market, India. It was a market that they have been trying to tackle for years now and it finally opened its first few retail stores. This was the first sign that Apple was trying to reduce its reliance on China.
Manufacturing has also been at the top of Apple’s mind. Earlier this year, one of its largest chip-producing partners Taiwan Semiconductor (NYSE: TSM), announced it would be building production facilities in the United States. Many believe that the influence of Apple as its largest customer helped TSM make this decision. What this does is it brings chip-manufacturing outside of Taiwan which is technically under the political control of China.
So that brings us back to the original question: Is Apple a risky investment? I’m still going to say it isn’t. There’s a lot that takes place in China for sure but it appears that Apple is taking steps to lower that reliance. Again, I also think the stock sell-off was an overreaction to a headline that was taken out of context. I still am of the mind that Apple is one of the greatest companies we’ve ever seen. At this point in its evolution, I don’t think you should expect exponential growth from the stock. But in terms of being risky, I don’t think there are many stocks safer than holding Apple in your portfolio.