A new batch of Wall Street commentary on Monday highlights exactly why we’re bullish on mega cap tech stocks Apple (AAPL) and Microsoft (MSFT). In a new research note, UBS reiterated its conviction in Microsoft stock, nodding at the software giant’s leading role in the race to develop artificial intelligence and integrate the technology into its business. In a separate analysis, the firm also shared new data around Apple’s iPhone sales, which signaled promising growth in India. Both notes highlighted the companies’ ability to capitalize amid an uncertain macroeconomic environment. Apple has been expanding its business into the world’s most-populous country in an effort to widen its customer base and diversify its supply chain. Microsoft, meanwhile, remains a top contender in the heated AI arms race, despite a shakeup in leadership and chaotic saga with key AI partner OpenAI. AAPL YTD mountain Apple (AAPL) year-to-date performance New data from UBS indicated that Apple continues to grab market share in India. Analysts at the firm wrote that the iPhone’s market share in India expanded 750 basis points in October year-over-year, to 13.5%, as sales surged by 138% compared with last year. Apple has already taken significant steps to expand into India, opening up its first retail stores in the country earlier this year. CEO Tim Cook also previously told CNBC that India presents a “huge opportunity” for the company. We’re bullish on Apple’s India expansion because it gives the company significant growth prospects in an untapped market. Additionally, Apple’s product quality and closed ecosystem have attracted a loyal customer base. In the U.S., the iPhone has garnered 53% of the smartphone market, according to data from Counterpoint Research , and the Club’s hopeful that the company can do the same in India and other emerging economies. To be sure, although the data from UBS indicates iPhone “sell-through” – a gauge similar to sales – in October was up 12% year-over-year, demand for iPhones is largely unchanged over recent years, the analysts said. That’s because “softness in the U.S., China and Europe is offset by growth in India and other smaller markets,” they wrote, citing the rise in Chinese competitors like Huawei . Although we still see Apple maintaining its status as an aspirational brand in China , signs of weakness in the country – coupled with geopolitical tensions with the U.S. – leave us more bullish on the India expansion. Not only does India present a new set of customers, but manufacturing costs are also lower in the country. That’s one of many reasons why the Club continues to reiterate an “own it, don’t trade it” stance on Apple stock. Shares of Apple, which are are up more than 50% year-to-date, were down 1.28% in afternoon trading Monday, at $188.78 apiece. MSFT YTD mountain Microsoft (MSFT) performance year-to-date UBS analysts remained “constructive on Microsoft’s AI story,” reiterating the firm’s buy rating on the company’s stock. The firm’s research note detailed key takeaways from a recent UBS tech conference, contending that the leadership shake-up at start-up OpenAI ended up being a “net positive” for Microsoft. OpenAI’s board briefly ousted CEO Sam Altman last month, prompting Microsoft to poach the chief executive. Following an uproar from OpenAI staff, however, Altman ultimately returned to his role at the company days later. Microsoft maintains a 49% stake in OpenAI, having invested roughly $13 billion . The outcome resulted in “better alignment between OpenAI and Microsoft’s goals” and “the period of disruption was so short that Microsoft did not hint at any disruption or [revenue] impact,” UBS analysts wrote. Microsoft also confirmed that the company has had consistent access and rights to all of OpenAI’s intellectual property and technology. Overall, we’re optimistic on any positive updates surrounding Microsoft’s AI efforts. The Club maintains that Azure, its cloud computing platform, is Microsoft’s greatest growth prospect. Additionally, we’re excited about potential recurring revenue channels from Microsoft’s generative AI assistant for its suite of Office apps, known as Copilot 365 . Piper Sandler analysts has previously forecasted that the tool could rake in over $10 billion in annualized revenue for Microsoft by 2026. Microsoft stock, up over 53% year-to-date, was trading 1.49% lower Monday, at $368.09. (Jim Cramer’s Charitable Trust is long MSFT, AAPL . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 1, 2023.
Brendan Mcdermid | Reuters
A new batch of Wall Street commentary on Monday highlights exactly why we’re bullish on mega cap tech stocks Apple (AAPL) and Microsoft (MSFT).
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