Apple has introduced a folding-screen iPhone with a starting price of $1,999, marking a new high for the company’s handset pricing. However, the stock’s valuation has reached an even loftier level, trading at 36 times the expected earnings for the coming year—a multiple not seen since the early iPhone era when the company experienced rapid growth.

This summer, Apple has established a significant valuation premium over other major technology companies such as Microsoft (25), Alphabet (26), Amazon (27), Nvidia (18), and Meta (21). Among the so-called "Magnificent Seven" tech giants, only Tesla carries a higher price-to-earnings ratio, which analysts attribute primarily to its comparatively low earnings. Historically, Apple has rarely held the top valuation position, primarily due to market concerns that its smartphone dominance might be temporary, as was the case with Nokia and BlackBerry, and because its growth rate has traditionally lagged behind its peers. Market projections continue to indicate that Apple’s earnings will expand at a modest high single-digit pace over the next few years, slower than many other major tech firms.

Despite challenges including inflationary pressures on input costs and a deceleration in its services revenue growth, Apple’s valuation continues to rise. Experts suggest that this premium reflects investor preference for technology companies that are less heavily invested in artificial intelligence (AI), especially at a time when enthusiasm for AI has fluctuated. According to David Vogt of UBS, Apple exhibits a countercyclical pattern relative to risk appetite. Whereas a year or two ago AI investments attracted considerable excitement, concerns are growing that escalating capital expenditures in AI infrastructure may not represent the best use of funds. Apple, by comparison, is largely avoiding large-scale investment in AI infrastructure.

Underlying this valuation gap is Apple’s brand promise of privacy and trust, which remains a fundamental part of its market appeal. Former CEO Tim Cook consistently emphasized Apple's commitment to protecting customer data, a stance that the current CEO, John Ternus, reiterated during the launch of the new iPhone. Apple’s AI capabilities, branded “Apple Intelligence,” are designed to operate locally on the device when possible and employ an encrypted “private cloud” only when higher computing power is necessary. This approach contrasts with other companies perceived as collecting vast amounts of user data.

This privacy focus has contributed to strong customer loyalty, with most iPhone users showing low rates of switching to competitors. In contrast, many AI companies, including large hyperscalers like Google and model developers like OpenAI and Anthropic, have been viewed as less accountable and transparent regarding the safety of their AI products. For example, Anthropic's CEO Dario Amodei has called for an industry-wide pause on AI development, a move interpreted by some as an attempt to share, rather than assume, responsibility for product safety. Critics argue that until AI firms make firm commitments to accountability comparable to Apple's privacy pledges, earning consumer trust will remain difficult.

Apple’s model faces its own challenges, however. The company aims to be the preferred platform for AI services without investing heavily in AI infrastructure itself. To achieve this, Apple plans to run foundation AI models on Google’s cloud infrastructure. It remains uncertain whether this partnership will maintain the high standards of user privacy Apple promises while delivering a seamless AI experience.

Traditionally characterized as a “walled garden” that tightly controls user experience, Apple may need to adapt this approach to accommodate AI technologies, which thrive on open data environments. While AI companies might learn from Apple’s success in building consumer trust, Apple itself might need to evolve its strategies to maintain relevance in the growing AI landscape.