Ignoring risks and reaching new highs, is the sky the limit for Apple?

Among large technology stocks, Apple (AAPL) has the slowest revenue growth and faces tariff-related risks in Trump's second term. However, judging from the stock price trend, these factors do not seem to be dragging down the stock's performance.

Over the past month, Apple's stock price has risen by nearly 9%, making it the second-best performing company among the so-called "Big Seven", behind Tesla (TSLA.US). At the close of U.S. stocks on Monday, Apple closed up 1.61%, with its stock price reaching $246.75, setting another record high. Apple's stock price has risen recently despite tepid market response to the latest iPhones and a disappointing earnings report in late October. Investors appear to be calm about the headwinds, with the Chicago Board Options Exchange's Apple Volatility Index (VIX) - which tracks estimated future volatility - recently hitting its lowest level in nearly a year.

Andrew Choi, portfolio manager at Parnassus Investments, said: "It's absolutely baffling that the stock has performed so well given the current state of the Chinese market and the geopolitical standoff we're about to face. It's surprising that the stock hasn't seen more volatility given these existential issues for its important business."

The severity and timing of the tariffs under President-elect Trump are unclear, but restrictions are expected to specifically target China, where most of Apple's devices are made. While there is optimism that CEO Cook will manage this risk as he did during Trump's first term, Jefferies analysts calculated that the worst-case scenario could increase the cost of each iPhone by $256.

For Apple, any additional costs associated with tariffs come at a bad time. Lute demand for the company's artificial intelligence-driven iPhones dashed hopes that the new models would lead to a long-awaited reacceleration of growth. The company has reported negative revenue growth in five of the last eight quarters. While it's expected to pick up next year, the pace is still slower than other big tech companies.

Richard Clode, portfolio manager of the Janus Henderson Investors Global Technology Leaders Fund, said: "The expected boost from the iPhone 16 replacement cycle has not materialized, and now people's expectations have returned to the iPhone 17. Earlier this year, the market was too pessimistic, but now it may be a little too optimistic."

But some Apple investors don't seem worried. They're betting that Apple will ultimately be the winner in artificial intelligence and that Cook will once again manage to avoid most of the tariffs imposed on China. Moreover, these investors also like the stock's defensive characteristics.

The company hasn't spent that much capital expenditure on artificial intelligence, especially compared with Microsoft (MSFT), Meta (META), Google (GOOGL) and Amazon (AMZN), which have all invested tens of billions of dollars to build out their artificial intelligence infrastructure. Instead, Apple stands to benefit from other companies' spending as major AI platforms compete to integrate into Apple's ecosystem.

Choi of Parnassus Investments said: "Apple will be the way to bring artificial intelligence to millions of consumers. Its advantage is that it has the 'throat point' between artificial intelligence and consumers."

Greg Halter, director of research at Carnegie Investment Counsel, said the company also has notable quality characteristics, including substantial free cash flow and stable buybacks.

However, he said he has been reducing his holdings of Apple shares due to concerns about its valuation and growth. He's also skeptical about demand for AI-powered iPhones.

"It's expensive, and I don't know how you can explain it, unless you really believe that the AI-powered iPhone supercycle is going to really boost revenue and earnings growth in the next few years," Halter said. "Really, what's going to drive the stock price higher from now on?"

The stock currently trades at nearly 33 times forward earnings, more than 50% above its 10-year average. Buffett's Berkshire Hathaway and hedge funds have been trimming their stakes in Apple, a sign that Apple's price-to-earnings ratio is unnerving some.

At the same time, less than two-thirds of analysts tracked by relevant agencies recommend buying the stock, making the stock significantly less popular than other large-cap stocks. While only 3 of 60 analysts recommend selling, the $243.25 average price target suggests Wall Street doesn't see any upside in the stock over the next 12 months.