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Following a 5.2% decline on Wednesday, Apple was overtaken by Middle Eastern oil behemoth Saudi Aramco as the world’s most valuable stock.
American consumer electronics powerhouse Apple Inc (NASDAQ: AAPL) has ceded its ‘world’s most valuable company’ title to Saudi Aramco (TADAWUL: 2222). This development came about after Apple stock declined more than 5% during the US trading session on Wednesday, resulting in a $2.37 trillion valuation. Meanwhile, Aramco, officially known as the Saudi Arabian Oil Company, had a market valuation of $2.43 trillion on Wednesday. The reversal seen with companies reflects the recent surge in the energy sector while also highlighting recent tech tepidness. The last time Aramco had a higher value than Apple was back in 2020.
Energy Sector Beats Tech Sector
Energy stocks and prices have been on the rise, buoyed by massive equities sell-offs in other industries – including technology. This is due to the current pervasive investor sentiment that the economic environment may deteriorate. Going by recent news, a number of reasons could be attributable to these fears, including the war in Ukraine and rising US inflation.
Since its $182.94 peak on January 4th, Apple stock has plunged approximately 20% year to date. Other influencing factors for the drop are rising interest rates – which came about to contain inflation, and supply chain problems. In addition, the fact that global oil prices are soaring does not really ease US inflation.
“You can’t compare Apple to Saudi Aramco in terms of their businesses or fundamentals, but the outlook for the commodity space has improved. They’re the beneficiaries of inflation and tight supply,” noted James Meyer, chief investment officer at Tower Bridge Advisors.
Aramco stock is up by more than 27% year to date, and in March the oil giant reported a doubling of full-year profit from last year. Commenting on the current state of global oil prices, Vijay Valecha, chief investment officer at UAE-based financial consultancy Century Financial noted:
“Oil prices remain buoyed since the EU proposed a phased embargo on Russian oil. However, the approval has been delayed amid requests from Eastern European members for exemptions and concessions.”
Furthermore, Valecha also explained that following the eventual embargo on Russian oil, European nations would look to the Middle East for supply. Consequently, the knowledge of this potential scenario is compelling market participants to place their faith in Aramco.
Will Apple Regain’ Most Valuable Company’ Status Soon?
Apple’s fall has some market observers wondering if its once-lucrative tech heritage may also become its undoing. According to Neil Campling, co-head of Mirabaud Securities’ Global Thematic Group:
“Apple stock has held up better than most peers, it is still subject to the great tech multiple compression, which has been witnessed as a result of central bank tightening and ramping inflation. Investors will now worry if consumers’ belt-tightening will lead to lower appetite to buy the ultimate consumer accessory, the iPhone.”
In other news, Apple announced that it was discontinuing the entire iPod line. This brings an end to the production of the iconic mp3 music player the company launched almost 22 years ago.