Discipline, resilience, and a bet on the people it already has
While the rest of big tech is wagering enormous sums to win the AI era, Apple is doing something quieter and, I think, smarter: making sure it can’t lose it. That’s the whole thesis. Apple doesn’t have to win the AI arms race — it just has to keep compounding while everyone else bets the company. And right now it’s doing exactly that, at all-time highs, despite headwinds it didn’t choose.
Discipline: spending a fraction, keeping the optionality
Apple has expanded its AI capability organically, spending only a sliver of its revenue — about $13B of capex against ~$416B of FY2025 sales, roughly 3%. (Set that next to Microsoft’s ~$190B.) It’s conserving cash, strengthening the balance sheet, and keeping the option to spend big later — from a position of strength — without wagering the company today. In an era when the market pays you to spend on AI, Apple is the one player that can afford to wait and see. That’s not timidity; it’s optionality, and optionality is worth a lot when the future is this uncertain.
Resilience: it held the line through a shock it didn’t pick
Apple is, until proven otherwise, the best consumer-products company in the world — strong brand, healthy upgrade cycles, and an iPhone that anchors an ecosystem of devices and services that compound each other’s stickiness. It’s no longer a one-product company.
And look at what it absorbed while holding ~47% company gross margins (services near 74%). 2025’s tariff regime on Chinese imports — reaching as high as 145%, where most iPhones are built — reportedly threatened to add ~$10 billion a year in costs, on top of soaring memory and component prices. A genuinely existential supply shock. Apple’s answer was to execute: it shifted production hard toward India (now ~25% of iPhones, targeting most US-bound units by end of 2026) and still printed record results. That’s the difference between a resilient business and a fragile one — and it’s why Apple sits at all-time highs despite headwinds it didn’t choose, while the company making a self-inflicted bet sold off ~24%.
The annuity: services keep compounding
Apple’s services keep growing steadily — ~$109B in FY2025, up ~13–14% year over year — high-margin, recurring, and riding on a growing installed base. Quietly, services are turning Apple from a hardware story into something closer to an annuity, and they’re becoming more central to the strategy each year.
The unfashionable bet: people over hype
Here’s the contrast I keep coming back to. To feed AI’s appetite for capital, much of tech has been letting people go — the industry shed roughly 245,000 jobs in 2025 and kept cutting into 2026, often shedding some of its brightest minds to free up cash for AI build-outs. Apple has been the conspicuous exception: it largely held its workforce and even announced plans to hire ~20,000 people over four years.
While everyone else bets the future of innovation is in the technology, Apple is betting it’s in the people it already has. It’s an unfashionable bet — and a very Apple one. I think it ages well.
The honest caveat
Apple is not risk-free, and it’s not cheap. It’s genuinely behind on AI — “Apple Intelligence” has underwhelmed and Siri remains weak — and it trades at a richer multiple (~34× earnings) than most of its megacap peers. Buying at an all-time high means paying up. But “slow and steady, from a fortress balance sheet, with the option to act later” is a profile I’ll pay up for — especially when the alternative is paying less for a company betting everything. (I put the two side by side, valuation and all, in the companion piece, Head to Head: Apple vs. Microsoft.)
What would make me lose faith in Apple
Symmetry matters: if I’m going to score Microsoft’s bull case, I should score Apple’s bear case. Here’s what would move me from believer to skeptic:
- Services hits a regulatory wall. A big slice of services profit is exposed to antitrust — the multibillion-dollar Google search-default payment, and App Store fees under pressure from the EU’s DMA and US courts. Gut either, and the highest-margin growth engine takes a real hit.
- The iPhone cycle stalls. Lengthening replacement cycles or a flattening install base would weaken the anchor the whole ecosystem rests on.
- Margins finally crack. Apple has absorbed tariffs and component inflation without giving up margin. If it can no longer pass costs through, the resilience thesis goes with it.
- The AI gap turns structural. Right now, being behind on AI looks contained. If it stops being contained — users leaving because Apple Intelligence is too far behind, or an AI-native device threatening the iPhone — then “winning by not losing” quietly becomes “losing slowly.”
- China breaks — demand or supply. Share losses to local champions, or an India transition that stalls while geopolitics disrupt China production faster than Apple can diversify.
- Discipline curdles into complacency. My bull case is that Apple is wisely patient. The bear case is that it’s simply late — that the capex-light stance is Apple missing a real platform shift, not waiting out a bubble. I’m betting on the former; if the evidence tilts to the latter, I’m wrong.
I hold the view I hold today — but I’ll watch these the way I watch Microsoft’s scorecard, and say so in public if they turn.
Full disclosure: I’m long Apple. Nothing here is a recommendation.
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Seek Value Now is published for educational and informational purposes only and is not investment advice. I may hold positions in the securities discussed. Do your own research before investing. — HG