Apple: the first tech giant to hit $2trn

Apple’s “best days were meant to be behind it”, said the FT. Four years ago, the activist investor and Apple cheerleader Carl Icahn sold all his shares in the corporation, citing concerns about its position in China. At that point, Apple’s market value was under $600bn. Two years later, it was a trillion dollars; and last week, its market capitalisation hit $2trn. Apple is the first non-state-owned company in the world to reach that milestone – and extraordinarily, the second trillion was added in just five months this year. As economies were locked down during the pandemic, and people became more reliant on technology to stay connected, investors turned to tech stocks. Facebook and Amazon have also been winners in this crisis, but Apple has a special status. Its creations – from the Mac to the iPad and the iPhone – “are consumer products as important as Ford’s Model T car”.

It was the iPod that arguably set Apple on the road to becoming the world’s most valuable company (it’s on track to exceed the value of the entire FTSE 100). That device wasn’t just great technology, said Ben Martin in The Times; it became a status symbol. Then Apple introduced the iPhone – and the “world changed forever”. People became so devoted to their iPhones, they just never switched – though almost every new model cost a lot more than the last, and rival firms were offering top-notch alternatives at lower prices. Then, just as it started to look as though this upgrade cycle wasn’t sustainable, Apple started to expand its services. Sales of iPhones now account for less than half of Apple revenues: increasingly, the money is being made from “wearables” such as AirPods, and “a plethora of offerings that gives Apple a recurring revenue stream”: cloud storage, Apple TV, Apple Pay and, crucially, the App Store.

In other words, said Ed Conway in the same paper, it’s relying less on developing exciting new products than on charging commissions (or rents) to stakeholders who want to reach its users. (For the privilege of using the App store, which is the only way of reaching iPhone users, developers typically have to give Apple 30% of their revenue.) And it’s not alone in that: rentier companies, which make money from owning things, instead of doing or making things, “form a far greater part of the economy than ever before”. But that model is not without risk, said Dan Runkevicius in Forbes. Epic Games (of

Fortnite fame) has now declared war on what it claims is Apple’s illegal use of monopoly power, a move that could bring it to heel in much the same way as Microsoft’s power was reined in during the late 1990s. It’s not the end for Apple, but it could put a stop to its rapid growth spurt.