Mirror, mirror on the wall, who is the juiciest Big Tech short of them all? OMG Apple (AAPL)!
Let me dissect the case before I am roasted alive for investment heresy: AAPL trades at an even more expensive valuation multiple than Nvidia at 30X earnings. The only problem is that NVDA’s revenue growth is on a triple digit hot streak as end demand for its AI training/inference GPU chips is on fire while AAPL delivered precisely zero revenue growth in 2023 and a pathetic 2% in 2022. Pardon the silly pun, so what’s cooking in Cupertino? When I came back from Istanbul in late October, AAPL traded at 170. Three weeks later on Gobble-Gobble Day, I dive into turkey, cranberry sauce and pumpkin pie to find out that AAPL’s price tag is now a nosebleed 190. Pour-quoi exactement mes chers amis? I can give you no other credible answer than the classic Thai word “bubbly-bubbly” and I bet you, your next French gourmet meal at La Bikanerwala that this 20 point rally will be reversed early 2024.
It is impossible to invest in Nasdaq without a grasp of its hyper volatile price swings and hype cycles. So 1999 was all about dotcoms and internet eyeballs until the music stopped and Nasdaq murdered the tech bulls with a 78% peak to trough mother of all bear markets. Last year was another mini-Nasdaq annus horribilis with the index down 34% but 2023 has seen it soar 38% and the Mag Seven ex-Elon has more than doubled in price with NVDA winning the gold medal with a 241% pop.
With the VIX at 13, the market is priced for greed and not fear even though I concede that tax loss selling/window dressing by sad sack funds ensure that the Mag Seven lead any Santa Claus rally but a tactical nemesis is almost certain as Nasdaq’s valuation multiples are way too expensive relative to inflation, interest rate, EPS and margin trends I track. As any investor in Dell and HP can attest, companies with 0-2% revenue growth trade at 10-11X earnings and not 30X like AAPL. The saturated smartphone market is not the global GPU AI chip market, where NVDA is a 92% market share colossus with spectacular pricing power and operating margins. So why did Tim Cook do a belly dance for Xi at the San Fran dinner where all the Big Tech CEO’s first applauded, then kowtowed in front of the Red Emperor, whose capricious whims once destroyed Jack Ma and can do the same to Apple.
The ban on Chinese diplomats, CCP apparatchiks using the iPhone is only the tip of the iceberg. The wolf warrior nationalist spirit in China was awakened by Trump’s assault on Huawei, which took its global smartphone market share from 16% to 2%. Yet Huawei’s latest high-end phone built with local chips was a winner on Singles Day with a 66% rise in sales and even Xiomi did 28% while Apple’s iPhone 15 was down 4%. India/services will not save Apple since they did not prevent three quarters of negative revenue growth and smartphones are 50% of AAPL’s revenue. The real time math makes AAPL a short at 190 for a 160 target!
