Bloomberg Tech Daily: How Apple got to the verge of $3 trillion

For the first time since early 2022, Apple Inc. is poised to reach a $3 trillion market capitalization, putting it in the stock market’s most rarefied air. But while the milestone comes on the heels of the Vision Pro headset debut, the valuation doesn’t necessarily reflect the response to that product.

At least in the short term, the Vision Pro will only appeal to the earliest of early adopters — people like software developers, Apple fanatics and mixed-reality zealots. The product has a $3,500 starting price, its underlying technology is still getting refined, and users will have to carry around an external battery pack. Moreover, Apple has yet to spell out a truly compelling reason to use the headset. 

Apple itself knows that... the headset is going to have a slow start. It’s expecting to sell about 900,000 units in the first year, contributing a few billion dollars in revenue. Compare that with the more than $200 billion that the iPhone raked in last year.

That all means it may take years for the Vision Pro to become an iPad or Apple Watch-sized business, something that the company hopes to one day achieve. Shareholders know these realities. So it’s certainly not the Vision Pro that has driven Apple to the brink of the $3 trillion mark.

Instead, the valuation is a reflection of Apple’s ever-expanding ecosystem. The Tim Cook dream is that consumers spend their days on an iPhone, iPad, Mac, Apple Watch and, one day, Vision Pro, and then subscribe to services like iCloud and Apple Music across all the devices. In the evenings, they may kick back on the couch, streaming Apple TV+ and renting iTunes movies via an Apple TV box.

When you factor in services like CarPlay, savings accounts, the Apple Card credit card, health tracking and iMessage — plus a flood of apps and other content — it becomes very hard for consumers to leave that ecosystem. And that’s what makes investing in Apple so attractive.

People are also addicted to their iPhones and other Apple products, and they’re paying increasingly higher prices for them. Cook has said that consumers are willing to “stretch” to buy top-end iPhones that can sit at the center of their digital lives.

One remarkable thing about Apple’s 46% rally this year is that the company hasn’t been part of the artificial intelligence boom that’s fueling many tech stocks. I wouldn’t expect Apple to debut any major new AI-related services until the latter part of 2024. And I am less optimistic than others that Apple has actual plans for a generative AI service in the short term, putting it behind Microsoft Corp. and Alphabet Inc.’s Google.

But Apple has another source of buzz coming in the next few months: an update of its biggest cash cow.

The iPhone 15 and 15 Pro lines will arrive by this fall, kicking off Apple’s biggest sales period of the year. The lower-end models will get the Dynamic Island from last year’s iPhone 14 Pro line and major camera upgrades. The Pro line, meanwhile, is due for new titanium casing and — on the largest model — further camera improvements.

Since the last two years of iPhone upgrades have been fairly modest, the latest changes are likely to whet consumer appetites and drive a strong upgrade cycle. And there’s nothing like the anticipation of a major new iPhone to excite shareholders as well. —Mark Gurman