By Amrith Ramkumar
Apple Inc. on Wednesday became the first U.S. public company to eclipse $2 trillion in market value, a dizzying achievement that highlights the iPhone maker's commanding role in the world economy.
Shares of Apple rose as much as 1.4% to $468.65, eclipsing the $467.77 mark needed to reach the milestone. They ended the day up 0.1% at $462.83, putting the company's market value just below $2 trillion.The stock has more than doubled from its March 23 low, boosted by steady demand for the company's devices and better-than-feared results in its core iPhone business as millions of Americans work from home.
Consumers' increasing reliance on technology is driving growth for Apple and other large internet companies such as Amazon.com Inc. That has created a chasm between the tech industry and other sectors from energy to travel that have seen the coronavirus sap demand and fuel a wave of bankruptcies. The technology sector is one of the few industries expected to continue expanding in the years ahead, pushing investors large and small to pour money into the group.
The milestone is the latest for Apple under Chief Executive Tim Cook, who succeeded late co-founder and product inventor Steve Jobs in 2011. Mr. Cook has expanded the company's footprint in China and leaned on its services business -- encompassing everything from its app store to Apple Music -- to generate steady growth and dispel concerns that Apple is too reliant on the iPhone.
Apple crossed $1 trillion in market value for the first time in August 2018.
Steady sales growth is driving the string of achievements. Apple's sales rose to $260 billion in the fiscal year ended in September from $216 billion three years prior. The company has even grown sales during the pandemic: For the quarter ended in June, they rose 11% from a year earlier to nearly $60 billion, exceeding Wall Street expectations. Earnings surged to $11.25 billion.
"It's incredible that companies that big can still grow that fast," said Nick Giacoumakis, president of New England Investment & Retirement Group, which has held Apple shares in one of its strategies for about four years. "I would never underestimate their ability to innovate."
Analysts say Apple could be joined in the $2 trillion club by other tech behemoths soon. Growth in e-commerce and cloud computing has given Amazon and Microsoft Corp. market values of about $1.6 trillion. Google parent Alphabet Inc. is valued at roughly $1 trillion, and Facebook Inc.'s market capitalization is up to about $760 billion.
The five biggest U.S. companies made up about 25% of the S&P 500 at the end of July, up from 12% four years earlier. Their rise helps illustrate how the market continues to climb near records even as many sectors and the broader economy flounder.
Tech's dominance also is coming under increasing regulatory scrutiny, a trend that investors worry could halt the industry's boom but has yet to stall the momentum. In late July, U.S. lawmakers questioned Mr. Cook and the chief executives of Amazon, Facebook and Alphabet about their business practices and dominant industry positions. A day later, Apple, Amazon and Facebook posted booming quarterly results and Alphabet also exceeded Wall Street expectations. Buoyant iPad and Mac sales lifted Apple's results.
"We know that these products are incredibly relevant, especially given the current circumstances," Apple finance chief Luca Maestri said on the company's earnings call. Mr. Maestri also said Apple will delay its annual iPhone lineup update to October from late September.
Apple was founded in 1976 as a personal-computer maker. Mr. Jobs brought PepsiCo Inc.'s John Sculley in to be CEO as the company expanded in the 1980s, but a leadership struggle led the Apple board to fire the Apple co-founder. By the mid-1990s, Apple was struggling and went through three CEOs in four years before bringing back Mr. Jobs, who introduced the iPod, iPhone and iPad.
The trio of hit devices helped Apple become the largest U.S. company in 2011, when it toppled Exxon Mobil Corp. Mr. Jobs died a few months later, but the firm has continued growing with Mr. Cook at the helm. Apple's market value is now about 11 times as large as Exxon's.
It is also now bigger than the entire Russell 2000 index of small-cap firms and roughly as big as the combination of six titans of American industry: Visa Inc., Johnson & Johnson, Walmart Inc., Procter & Gamble Co., PayPal Holdings Inc. and Netflix Inc.
A company's market value is calculated by multiplying its share count by its stock price. Apple recently said it would carry out a 4-for-1 stock split in late August, giving shareholders three additional shares for every share they own. The news has added fuel to the rally in Apple shares because some analysts think a lower share price might help attract even more investors who might be put off by a lofty stock price.
Apple is already one of the most popular companies for individual investors using trading apps such as Robinhood. These amateur traders have increased their activity in recent months, resulting in a flood of money from ordinary people going into the tech sector.
The rise in Apple shares also is paying off for large money managers such as Warren Buffett, the CEO of Berkshire Hathaway Inc. The conglomerate owned more than 245 million Apple shares at the end of the second quarter, FactSet data show, a stake now worth about $115 billion.
Some analysts are concerned that the sharp run-up in shares of Apple and other tech stalwarts leaves them vulnerable to a reversal, particularly if the pandemic worsens and begins dragging down markets broadly. But many investors say there are few attractive alternatives to owning large tech stocks, with interest rates near or below zero in the developed world and most companies struggling through the coronavirus crisis.
Jim Boothe, chief investment officer of Brentview Investment Management, has held Apple shares since 2012 and said the company's recent results show it is less dependent on the iPhone for growth.
"It has become more of an ecosystem," he said. "Customers are willing to pay for their quality, premium products."
Write to Amrith Ramkumar at firstname.lastname@example.org