Is Apple Too Expensive?

Two things happened this week. Apple’s (NASDAQ: AAPL) announcement of new AI features drove the stock to an all-time high. However, the EU is looking into whether Apple adheres to rules regarding whether it uses anti-competitive practices in its App Store. The EU would use its Digital Markets Act to evaluate and possibly punish Apple. According to the FT, “If found to be breaking the DMA, Apple faces daily penalties for non-compliance of up to 5 per cent of its average daily worldwide turnover, which is currently just over $1bn.” Apple could still change some of its business practices to avoid a fine.

The EU is not the only place Apple can be investigated and punished. The Justice Department has also brought a suit, which claims Apple tried to increase its share of the smartphone market via monolithic actions. Similar suits could hit other large tech companies. For now, Apple is “first in line.” Apple still faces problems from rival Samsung.

US government lawsuits are often underrated as risks to stockholders. They shouldn’t be. Over the years, the government has successfully filed suits against Microsoft (NASDAQ MSFT) and AT&T.

Apple’s stock run-up was because it will integrate powerful AI tools into its iOS operating system and its products, particularly the iPhone. Investors took this as a sign that Apple would not fall behind big tech rivals led by Alphabet (NASDAQ: GOOG) and Microsoft. Apple shares surged by almost 8% to an all-time high of $220.20. Several Wall St. analysts have even higher price targets. The next considerable test of Apple’s shares will be when it announces calendar second-quarter earnings and launches the iPhone 16.

The antitrust suits did not get much coverage as Apple talked about its AI features. Maybe they should have.

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