Apple (AAPL) just lost a coveted title.
The iPhone maker snagged that crown in 2020 on financial performance that made investors dizzy on strong sales of its hardware -- iPhone, Mac, Apple Watch -- and a surge in services.
These revenues have continued to rise thanks to the Covid-19 pandemic which has seen the world stay connected through technological tools. The Cupertino, California-based firm had also managed to reassure investors worried about the disruption caused to supply chains by lockdown measures and the shortage of chips.
It is therefore no surprise that Apple had passed the Saudi oil giant Saudi Aramco to become the world's most valuable company. Apple became the first company in the world to hit the $3 trillion mark.
Two years later, the world has changed. Economies have reopened. Inflation is galloping. Supply chain issues have deepened with new lockdowns in China and soaring raw material prices following the Russian invasion of Ukraine. Recession fears have never been higher among investors. And unsurprisingly, it is the technology sector that pays the highest price.
Apple Is No Longer The World's Most Valuable Company
From upstart firms to tech behemoths, almost no one has been spared. Apple shares are down 17% to $177.08 since January. Billions of dollars in market capitalization evaporated.
At the same time, the energy sector is booming. Crude oil prices have soared on supply concerns after Russia's conflict in Ukraine. Crude oil WTI is up 46.9% since January. As a result, shares of energy companies have risen sharply. This is the case for Saudi Aramco shares, which have gained just over 25% since January.
The Saudi giant announced in March 20 that its net income increased by 124% to $110 billion in 2021, compared to $49 billion in 2020. The company benefitted from surging oil prices. Brent Crude, the global benchmark, rose almost 80% during the period.
Saudi Aramco thus took the opportunity to regain the crown of the world's most valuable company. The firm's market cap was $2.382 trillion as of May 13, compared to Apple's $2.381 trillion, according to FactSet data. Saudi Aramco has held the crown since May 11.
Given the current instability of the markets, it is a safe bet that the two groups will exchange this crown throughout the year. Tim Cook, Apple's CEO, warned in its latest quarterly results that the lockdown in China and the Russian war will cost the company between $4 billion and $8 billion in the current quarter.
"Understandably, Cook would not predict when the supply issues will clear. Speaks to how many moving parts are in play. My guess, Dec-22," Loup Funds co-founder Gene Munster said.
"$AAPL essentially guided June revenue to $83B, compared to the Street at $87B mostly due to supply chain headwind, and to a smaller extent FX and Russia."
Munster added that: "The good news is demand is there, they just can’t keep up with it."
Microsoft, Tesla, Meta
Apple could take advantage of the expected launch of the iPhone 14 in the second half of 2022 to outrun Saudi Aramco, but to do so the group would need to have control over the supply chain.
Microsoft (MSFT) with a market cap of $1.95 trillion is third. The software giant is followed by Alphabet (GOOGL) with a market value of $1.53 trillion and Amazon (AMZN) with $1.15 trillion.
Tesla (TSLA), the electric vehicle maker, is sixth with a market capitalization of nearly $800 billion, despite a turbulent April due to the ongoing acquisition of Twitter (TWTR) by its CEO Elon Musk.
Warren Buffett's conglomerate Berkshire Hathaway (BRK.A) is seventh with a market capitalization of $683.38 billion, followed by Mark Zuckerberg's Meta Platforms (FB) with $567.85 billion.
