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As apple (Nasdaq:AAPL) cooperates with ChatGPT developers Open AIBut some financial traders are too busy buying Apple shares to consider the impact: It makes no sense to invest in Apple if the best-case scenario is already priced in.
Don't get us wrong: It's entirely understandable that Apple would want to add AI capabilities to its popular tech gadgets. Apple's most enthusiastic investors may be getting ahead of themselves, and chasing a skyrocketing stock could be risky for your finances.
Apple takes the top spot
So, it's official: As of this writing, Apple is the most valuable company in the U.S. Amazingly, Apple's market cap is well over $3 trillion.
It didn't take much digging to discover why: Apple had just announced a new AI platform called Apple Intelligence at its Worldwide Developers Conference event.
Additionally, at its WWDC event, Apple announced new generative AI features for its next iPhones that Apple said will “help summarize text, create original images, and get the most relevant data when you need it.” Bloomberg.
another Bloomberg According to the report, Apple revealed that it had “signed a deal with OpenAI to integrate ChatGPT into iPhones, iPads and Macs,” but interestingly, the companies “remained silent about the financial terms” of the deal.
You can probably guess what happened to Apple's stock price following these AI-centric announcements: buyers went wild, and Apple's stock price quickly hit an all-time high.
Apple investors need to be realistic
As a “buy low, sell high” investor, I'm wary when the market prices a best-case scenario into a stock price — and in Apple's case, that best-case scenario is that consumers get as enthusiastic about its pricey, AI-enhanced iPhones as stock traders.
First, not all upcoming iPhones will have the new gen-AI features. Barons “Apple Intelligence will only be available on iPhone 15 Pro and Pro Max smartphones, which by some estimates represent just 5% of the current iPhone installed base,” it noted.
As mentioned earlier, investors don't know the financial terms of Apple's deal with OpenAI, and Apple may end up paying more than the gen-AI technology is actually worth.
There may also be reliability issues: data obtained from ChatGPT may contain errors or personal information, putting Apple's reputation at risk.
Finally, it's unclear whether consumers will be all that interested in AI-enabled smartphones. In the words of Robert Pavlik, senior portfolio manager at Dakota Wealth Management, “You have to be realistic, and it's going to take time for the numbers to bear that out.”
The problem is that very enthusiastic investors didn't wait to “see the numbers” — they just bought Apple stock and decided to question it later.
It's time to lock in profits on Apple stock
Apple is a giant among tech companies, but even great companies like Apple can sometimes be overvalued, especially when the market assumes that the best-case scenario is inevitable.
For all we know, the company's deal with OpenAI may not have favorable financial terms for Apple, and there's no guarantee that consumers will be willing to shell out top dollar for an AI-enhanced iPhone.
The takeaway here is that Apple shares have just hit an all-time high, so investors should take profits. If the stock falls by at least 10%, it's okay to hold a small amount of Apple stock again.
Publication date, David Moardel Did not have, directly or indirectly, any positions in the securities mentioned in this article. Opinions expressed in this article are solely those of the author, copyright InvestorPlace.com. Publication Guidelines.
