The making of a tri-trillionaire

Apple’s market capitalisation reached an impressive USD 3 trillion, surpassing other tech giants and even the combined value of top American companies.

It took 42 years for the first trillion. Apple accomplished an astonishing feat in August 2018 when its market capitalisation reached USD 1 trillion.

Surging past USD 2 trillion precisely two years later in 2020, Apple continued its impressive growth. The USD 3 trillion landmark came in January 2022, a remarkable achievement within just 16 months. Unfortunately, the company couldn’t sustain that value. Nevertheless, on 30 June 2023, Apple closed at an astounding USD 3 trillion.

How large is USD 3 trillion?

To appreciate the magnitude of USD 3 trillion into perspective, it is comparable to the market value of all the stocks listed on the National Stock Exchange of India.

In the highly exclusive trillion-dollar club, which currently consists of only six members, Apple stands tallest alongside tech giants such as Microsoft, Alphabet, Amazon, and Nvidia. The sixth member of this elite group is the energy titan, Aramco. At a value of USD 3 trillion, Apple surpasses the next-largest company, Microsoft, by nearly USD 500 billion and is nearly twice as valuable as Alphabet.

In 2023, Apple’s shares have surged nearly 50%, outperforming the growth of the Nasdaq Index, which has grown by approximately 30%.

Apple’s worth is nearly equivalent to the combined value of Tesla, Meta, Berkshire Hathaway, UnitedHealth, and Visa, which are ranked as the sixth through tenth most valuable American companies. It is roughly 25 times greater than General Electric, 20 times larger than Intel, and approximately 14 times more than Reliance Industries. Further, Apple’s worth exceeds that of all the world’s cryptocurrencies combined.

What factors have contributed to Apple’s success?

While it is challenging to pinpoint the exact reasons behind Apple’s continuous triumph, there are several indicative factors related to its superior market and financial performance.

Apple has followed a consistent strategy based on the core principles of its mission, which aims to provide the best user experience to customers through innovative hardware, software, and services. This approach has propelled Apple as the top-ranked global brand.

Some key elements of Apple’s strategy include its priority on consumer experience over business needs and emphasis on design over product engineering. The company also made substantial investments in research and product innovation; approximately USD 98 billion between 2018 and 2022. All this, while maintaining its financial strength, e.g., cash reserves exceeding USD 50 billion that enable instant investments, acquisitions, and share buybacks to reward investors.

It has also been focusing on efficiently managing complex operations and supply chains across multiple continents and leveraging on ancillary businesses such as services, content, and financial services to generate additional sales and maintain customer loyalty within the ecosystem. For instance, products like Apple Wallet, savings accounts, and credit cards complement the iPhone and contribute to the overall revenue.

The company has also been working on delivering a consistent and superior in-store experience at its iconic branded stores, as exemplified by the excitement surrounding the recent opening of Apple-owned stores in India. Besides, it has been adopting a contrasting approach to workforce management compared to other major tech companies. While many others in the trillion-dollar tech club have implemented layoffs in recent months, Apple has only slowed down its hiring pace.

Apple has made substantial investments in research and product innovation, approximately USD 98 billion between 2018 and 2022.

Mitigating global risks

Apple has demonstrated its ability to manage geopolitical risks effectively. Unlike some Western tech companies, the company has been less affected by geopolitical tensions in China and has faced largely encountered operational constraints due to strict COVID control policies and workplace-related issues.

To mitigate various challenges, Apple has started to shift its manufacturing from China to India and Vietnam. Supported by a buoyant domestic market and production-linked incentives, Apple has achieved exceptional performance in India, with monthly iPhone exports surpassing USD 1 billion. Apple alone accounts for half of India’s mobile phone exports.

Apple’s growth has been extraordinary with its existing product and services portfolio. With the recent launch of the Vision Pro Mixed Reality headsets, Apple is venturing into a new market with numerous competitors, notably Meta Platforms. While the Vision Pro is unlikely to yield significant revenue in the near term, Apple’s entry will mark the start of mainstream adoption in this emerging market. Apple also plans to tap into the mobile advertising market, further adding to its value.

How high can Apple’s valuation soar?

Despite Apple’s recent forecast of a drop in revenues for the current quarter, a combination of its existing business and the anticipation of ‘what comes next’ (including the iPhone15) is likely to drive a higher valuation.

Since the beginning of 2023, Apple’s shares have surged nearly 50%, outperforming the growth of the Nasdaq Index, which has grown by approximately 30%. Even after this meteoric rise, research analysts predict that Apple can achieve another 25% increase over the next 12 months.

If this projection materialises, Apple’s market value would approach USD 4 trillion.

By Jaideep Ghosh

The author is a former Partner at KPMG in India.

Views are personal.

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