Apple Inc. (AAPL.US) Becomes a "Safe Haven" Amid AI Selloff; Bernstein: A 37x P/E Ratio Is Still "Not Expensive"

Title context: Apple Inc. (AAPL.US) Becomes a "Safe Haven" Amid AI Selloff; Bernstein: A 37x P/E Ratio Is Still "Not Expensive" Text: Amid the recent selloff in AI concept stocks, Apple Inc. (AAPL.US) has been viewed by the market as a "safe haven" among tech stocks due to its extremely low capital expenditure and low reliance on AI servers, and its price-to-earnings (P/E) ratio has consequently been pushed to a historical high. Bernstein released a research report providing an in-depth analysis of the reasonableness of Apple Inc.'s 37x forward P/E ratio, and maintained its "Outperform" rating on the stock with a target price of US$380. Why is Apple Inc. viewed as a "safe haven" among tech stocks? The report noted that Apple Inc.'s capital expenditure as a percentage of revenue is only about 2%, leaving it almost unaffected by the AI arms race. Apple Inc. chose to collaborate with Alphabet Inc. Class C to develop its "Apple Inc. Foundation Models" (AFMs), and when launching Siri AI, it had many AFMs run on-device, thereby significantly reducing its reliance on expensive AI servers. This asset-light model shields Apple Inc. from the potential decline in AI data center capital expenditure (currently plaguing upstream semiconductor and memory stocks), and also avoids the shrinking free cash flow risk currently faced by hyperscale cloud providers. In addition, Bernstein believes that if the AI bubble does burst, Apple Inc. could actually benefit, for example by acquiring distressed cheap assets at extremely low cost. Safe-haven status pushes valuation higher: relative P/E ratio hits record high This "safe haven" attribute has directly pushed Apple Inc.'s valuation to a historical extreme. Apple Inc. currently trades at 37x its expected earnings per share for calendar year 2027 (a historical high), and its relative forward P/E ratio has also reached 2.0x that of the S&P 500 (also a historical high). Bernstein noted that among U.S.-listed companies with a market capitalization exceeding US$200 billion and consensus EPS growth of less than 15% going forward, only four companies have a forward P/E ratio above 30x: Costco (46x), Walmart Inc. (39x), Apple Inc. (37x) and GE Aerospace (36x). Decoupling from tech stocks, Apple Inc. is now being priced as a "high-quality consumer stock" The report argues that the market has long decoupled Apple Inc. from large-cap tech stocks and reclassified it as a "defensive compounder." The report noted that among current large-cap tech stocks, the linear correlation between P/E ratio and revenue/earnings growth has weakened significantly. Apple Inc. is the ultimate embodiment of this phenomenon: it enjoys a sector-top valuation (37x) despite growth near the bottom of the sector. For example, Alphabet Inc. Class C and Meta have 2027 expected P/E ratios of only about 17-19x, and Microsoft Corporation is at 24x; their revenue and earnings growth are higher than or equal to Apple Inc.'s, yet their valuation multiples are significantly lower than Apple Inc.'s. By contrast, Apple Inc.'s valuation characteristics are closer to those of high-quality consumer stocks. In the consumer staples, large retail and luxury goods sectors, P/E ratios are typically positively correlated with growth rates. Apple Inc.'s current forward revenue growth (9%) is actually the fastest in this group; its 3.0% free cash flow yield and approximately 3% share buyback program mean it returns almost all of its free cash flow to shareholders. Bernstein believes that compared with Costco (46x) and Walmart Inc. (39x), Apple Inc.'s 37x valuation even appears more cost-effective. Is a 37x P/E ratio outrageous? Customer loyalty and cash flow support the premium In response to questions over whether Apple Inc.'s valuation is too high, Bernstein argues that it is not outrageous, citing four characteristics that make Apple Inc. resemble a consumer staples stock: High demand visibility: Apple Inc. has a massive base of about 1.4 billion active iPhone users, a replacement cycle of about 4 years, and recurring services revenue accounting for about 40% of gross profit, giving it high visibility into revenue and earnings for the next year. Extremely high user loyalty: Surveys show that iPhone users' brand retention rate is as high as 90%. Converted on a 3-4 year replacement cycle, Apple Inc.'s annualized retention rate is about 96%-97%, even higher than Costco's 92.3% membership renewal rate (U.S. and Canada). Strong pricing power: The iPhone has the lowest price sensitivity among mainstream smartphones. Its price elasticity is about 1.3, well below the average of 2.5 for other phone makers. Stable shareholder returns: In fiscal 2026, Apple Inc. returned about US$102 billion to shareholders through buybacks and dividends. With about US$57 billion in net cash and US$136 billion in free cash flow, Apple Inc. is capable of continuing to repurchase shares equivalent to about 3.0% and 3.3% of its market capitalization in fiscal 2027 and 2028. In addition, Apple Inc. has extremely strong earnings stability. Over the past 10 years (since the first quarter of fiscal 2016), in 44 quarters, its earnings per share beat sell-side expectations in 40 quarters and missed in only 2. Bernstein believes that the premium the market grants Apple Inc. partly reflects its rare trait of "earnings never blowing up."