The ultimate battle between bulls and bears will take place on July 30th! HSBC leads the way in being bullish, can Apple Inc. (AAPL.US) leverage the benefits of edge AI to impact a market value of 5 trillion?

HSBC has upgraded Apple Inc. (AAPL.US) to a "buy" rating and raised its target price from $260 to $366. This reflects Wall Street's growing optimism about the iPhone maker's position in the market, at a time when many AI-related stocks are stagnating. Previously rated as "hold," analyst Nicholas Kote Colusen wrote that the company is "now at a turning point in its operations" because "the company can now move away from the debate on excessive capital expenditure," "and because Apple Inc. can leverage its base of 2.5 billion devices with the upcoming Apple Intelligence overhaul." Tech stocks have faced a broader sell-off after the release of a new AI model by Chinese startup Yuezhi, but Apple Inc.'s stock price has seen little change in pre-market trading. The stock has shown strong performance recently, rising more than 20% since late June, and hitting new highs multiple times this week. Apple Inc. is the best-performing stock among the so-called Big Seven tech companies this year, with a market value of $4.9 trillion, surpassing NVIDIA Corporation to become the world's largest company by market capitalization. Apple Inc. hits all-time high stock price While many other tech sectors have been struggling, Apple Inc.'s recent strong performance stands out. It is worth noting that the Philadelphia Semiconductor Index has fallen 19% from its peak in June, showing a clear reversal of trends. Despite investors' previous frustration with Apple Inc.'s AI products, Kote Colusen is optimistic about the company's deployment of the AI-powered digital assistant Siri this year. He wrote, "The AI boost comes at the right time, as we believe Apple Inc. has one of the most innovative product pipelines." Apple Inc. is expected to release a foldable screen iPhone in September, which many see as a significant potential catalyst, especially since the device is expected to come with a high price tag that could help offset the impact of high storage chip prices. "Combined with better AI, this could trigger a strong upgrade cycle," the analyst wrote regarding Apple Inc.'s hardware product pipeline. Earlier this month, Japanese media reported that Apple Inc. had informed its suppliers that it is preparing to produce around 10 million foldable screen iPhones this year, higher than the previously predicted 7 to 8 million units. "Bull-Bear Battle" on July 30 earnings day Despite the upgrade rating, many analysts remain more skeptical about Apple Inc. compared to other mega-cap stocks. Currently, slightly over 60% of analysts recommend buying the stock. In contrast, data shows that 90% of analysts covering Microsoft Corporation, Amazon.com, Inc., Meta, and NVIDIA Corporation have given buy ratings to those stocks. However, the average target price for Apple Inc. is around $322, which implies a roughly 3% downside from its Thursday closing price. Earlier this week, KeyBanc Capital Markets downgraded Apple Inc.'s rating to "hold," citing concerns about demand and valuation. This month, the bull camp led by HSBC HOLDINGS and Morgan Stanley launched a strong bullish defense. The core logic of the bull camp is that Apple Inc. is reaching a "turning point in operations." First, in terms of AI logic, Apple Inc.'s unique "light asset" model is starting to show its power. Unlike cloud giants that often invest 40% of their revenue into data center construction, Apple Inc. is expected to have capital expenditure of only 2.5% of its sales by 2026. Apple Inc. does not need to be involved in expensive computing power arms races but instead can capitalize on its massive base of 2.5 billion active devices globally, directly monetizing AI commercialization through the forthcoming "Apple Intelligence" and digital assistant Siri. In addition, Apple's AI features have recently cleared regulatory hurdles in key markets such as China, greatly boosting confidence in the global upgrade cycle for iPhones. Second, the extremely strong product lineup is becoming the foundation for price hikes. Despite the crisis in global supply chains due to skyrocketing memory chip prices (with Apple Inc.'s DRAM and NAND costs expected to jump by 370% and 280%, respectively, by 2025-2027), Morgan Stanley points out that, thanks to high user loyalty and strong bargaining power, Apple Inc. has the ability to pass on costs to consumers. The upcoming foldable screen iPhone (rumored to have additional stock of 10 million units this year) and the future iPhone 18 series are expected to bring significant price increase opportunities, which will not only not dampen demand but trigger an unprecedentedly strong high-end upgrade cycle. However, amid a chorus of praises, rational analysts have decisively sounded the alarm. KeyBanc Capital Markets surprisingly downgraded Apple Inc.'s rating to "hold" earlier this month, slashing the target price to $250, which implies over 20% downward potential from the current stock price. At the same time, some analysts have rated it as "hold," stating that the current risk-reward ratio is very unfavorable. The concerns of the bear camp are also hard to ignore: first, the valuation is extremely "fearful." Apple Inc.'s current trading price is up to 35 to 36 times its expected earnings for fiscal year 2026 (far above the S&P 500 index's average of around 20 times). Technical indicators (such as RSI) are severely overbought, indicating that the market has already perfectly priced in all future positives (including AI expectations and the upgrade cycle), with very little room for error. Once a slight flaw appears in the financial report at the end of July or in subsequent sales, the stock price will face a fierce mean reversion. Second, concerns about underlying hardware demand and the decline of carrier subsidies. Bearish analyst Brandon Nispel emphasized that while iPhone shipments overall gained a 20% market share in the second quarter due to a strong refresh cycle, the global smartphone replacement cycle is inevitably lengthening in the long run. More critically, the three major U.S. mobile carriers have openly discussed gradually phasing out high equipment subsidies. Once they no longer foot the bill, the high terminal prices will directly dampen consumers' upgrade desire, then slowing down the expansion pace of Apple Inc.'s high-margin businesses (like iCloud, Apple Music). Furthermore, while the accelerated diversification of the supply chain to places like India and Vietnam has reduced risks for GEO Group Inc., it will continue to "progressively eat away" at Apple Inc.'s gross margin in the medium term. Some analysts have bluntly stated, "Apple Inc.'s profitable golden age driven by global efficiency is coming to an end." The current Apple Inc. is engaged in a tug-of-war between "fundamental stability" and "lack of an AI narrative." The upgrades from large banks like HSBC and Citigroup are essentially betting that Apple Inc. can survive the "AI gap" with its "pricing power" and "existing ecosystem." However, the concerns of bearish institutions like KeyBanc are not unfounded - if AI fails to bring substantial upgrade cycles, the high valuation will be difficult to sustain. The financial report on July 30 will be the first litmus test for this gamble.