We recently published a list of Top 10 Stocks Analysts are Watching as AI Selloff Deepens. In this article, we are going to take a look at where Apple Inc (NASDAQ:AAPL) stands against other top stocks analysts are watching as AI selloff deepens.

Major AI stocks are struggling to gain traction as investors rethink their strategies amid concerns of a slowdown in spending. Even top tech bulls are starting to use the word “bubble” for the AI trade. Gene Munster, Deepwater Asset Management managing partner, said in a latest program on CNBC that he believes we still have two years of the AI bull run before the bubble bursts.

“From a high-level perspective, I always return to the fundamentals as a tech investor. The fundamentals of these companies remain strong. I predict we have two good bullish years ahead before a spectacular bubble burst. When I see this, it shakes my confidence, but if I stay focused on the fundamentals, I still believe this trade will play out.”

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For this article, we picked 10 stocks analysts are currently talking about. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A wide view of an Apple store, showing the range of products the company offers.

Apple Inc (NASDAQ:AAPL)

Number of Hedge Funds Investors: 158

Lo Toney, Plexo Capital founding managing partner, said in a latest program on CNBC that Apple Inc (NASDAQ:AAPL) CEO Tim Cook’s efforts to persuade President Donald Trump for exemptions from tariffs apparently did not work and the company may need to pass on the impact of the levy to consumers or suppliers.

“I think the thought was that the ability for Cook to pilgrimage down to Mar-a-Lago and achieve what he did last time clearly isn’t going to be the case. It’s well laid out—either Apple can squeeze the suppliers a little bit, but I think that’s probably already happened as a natural course of business, or it can be subsidized by the telcos, passed on to the consumer, or absorbed by Apple itself. It’s going to impact someone somehow.”

Apple’s results were helped by Services revenue in the latest quarter, but the key challenges haunting the company remain as they were. Many analysts believe just a few AI apps would not be enough to trigger a broader upgrade cycle for iPhone. Apple is dealing with currency headwinds as the stronger US dollar is expected to reduce top-line growth by 2.5% next quarter. For Q2 FY2025, management expects overall revenue to grow in the low to mid-single digits. Apple’s stock is trading at a premium valuation, with a price-to-earnings ratio of 39-40x, a price-to-free-cash-flow ratio of 33-34x, and a PEG ratio exceeding 3x. Upcoming quarters would be difficult for Apple and its current valuation is not justified.

Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:

“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.

The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.

Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.

Overall, AAPL ranks 3rd on our list of top stocks analysts are watching as AI selloff deepens. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.