It’s a favorable time for bullish investors on Wall Street. Since the beginning of 2023, the established Dow Jones Industrial Average, broader S&P 500, and growth-focused Nasdaq Composite have surged by 34%, 59%, and 91%, respectively, as of January 24, 2025.

Several factors have contributed to this surge, including a decrease in inflation rates, better-than-expected corporate earnings, and Donald Trump’s return to the presidency. However, among the key drivers behind this bullish trend, the rise of artificial intelligence (AI) shines the brightest.

While many influential companies on Wall Street are utilizing AI to drive growth, one major player, Apple (NASDAQ: AAPL), is strategically investing its $725 billion outside of technology ventures to enhance its financial performance.

Apple Ranks Among Wall Street Giants for Good Reason (AI Included)

Apple was the first-ever public company to exceed a market value of $3 trillion and, as of this past weekend, stands as the second-largest company, trailing only Nvidia. Over the years, Apple has consistently led the Wall Street rally, a feat attributed to more than mere luck.

To begin with, the iPhone continues to be the leading smartphone in the U.S. Since the introduction of the first 5G-enabled iPhone in late 2020, Apple has maintained a domestic smartphone market share of 50% or more. The continuous upgrade to 5G networks has ensured steady demand for Apple’s flagship product.

Apple’s commitment to innovation has also significantly contributed to its market cap exceeding $3 trillion. This includes new physical products like the iPhone, iPad, and Apple Watch, along with the company’s transition into becoming a platforms-focused entity.

Under CEO Tim Cook’s leadership, Apple has heavily emphasized growing its subscription services. By enhancing its subscription offerings, the company aims to boost operating margins, increase customer loyalty, and create stable revenue streams that mitigate the fluctuations characteristic of major iPhone upgrades. Currently, the Services segment has been reliably expanding by double digits and represents about a quarter of Apple’s total sales.

Like other tech companies, Apple is investing heavily in AI to stimulate growth at both the top and bottom lines. Last year, the company unveiled Apple Intelligence, its AI-driven personal assistant that can perform tasks like writing, summarizing text, and creating images.

Finally, Apple’s strong cash reserves allow it to make bold investments for future expansion.

$725 Billion Investment Crucial for Apple’s Earnings Growth

While several factors have propelled Apple’s journey, the most significant catalyst for its earnings per share (EPS) growth is still to be mentioned. I’m referring to Apple’s ultimate investment strategy: stock buybacks.

Since initiating a share buyback program in 2013, Apple has created a model that many investors envy. Here’s a summary of Apple’s share repurchase activity over its last 11 fiscal years (which end in late September):

• 2013: $22.95 billion in repurchases
• 2014: $45 billion
• 2015: $35.253 billion
• 2016: $29.722 billion
• 2017: $32.9 billion
• 2018: $72.738 billion
• 2019: $66.897 billion
• 2020: $72.358 billion
• 2021: $85.971 billion
• 2022: $89.402 billion
• 2023: $77.55 billion
• 2024: $94.949 billion

In total, Apple has repurchased $725.69 billion of its own shares over 11 years, reducing its shares outstanding by nearly 43%. To illustrate the impact, the reported EPS of $6.08 for fiscal 2024 would have dropped to just $3.47 without the share buyback initiatives.

AAPL Shares Outstanding data by YCharts.

Ongoing share buybacks serve multiple purposes for Apple. First, they decrease the number of shares outstanding, potentially boosting EPS and making the stock more appealing to investors.

Second, buyback programs encourage long-term investing. As the share count shrinks, the ownership stakes held by existing investors increase incrementally, which may lead to reduced volatility in share prices and enhance stock attractiveness.

Third, buybacks signal that Apple’s insiders (management and board) believe their shares are undervalued.

Challenges Persist Despite Apple’s Buyback Success

With a substantial cash reserve, Apple shows no indication of slowing down its buyback initiatives.

However, just because Apple is aggressively repurchasing its shares doesn’t guarantee that its stock is a good investment. Billionaire Warren Buffett sold 67% of Berkshire Hathaway’s stake in Apple in the past year, raising two valid concerns.

AAPL Revenue (Annual) data by YCharts.

Firstly, Apple’s product sales have stagnated over the past two years. Although the iPhone remains the best-selling smartphone in the U.S., stagnant sales for the iPhone, iPad, Mac, and other devices suggest that consumers are no longer as impressed with Apple’s hardware. While there is hope that Apple Intelligence might rejuvenate interest, the company faced declines in physical product sales even in a high-inflation environment in fiscal 2023.

Secondly, another concern lies with the high historical valuation of Apple stock. Despite robust buyback activities, Apple recently reached a price-to-earnings (P/E) ratio exceeding 42—an unprecedented level in 17 years. The stock market is exhibiting elevated valuations overall, and Apple’s premium valuation stands out even more.

While Apple is likely to continue its share buybacks, significant improvements to its product lineup are necessary before its current stock price seems justified.

Sean Williams has no positions in the stocks mentioned. The Motley Fool has interests in and recommends Apple, Berkshire Hathaway, and Nvidia. The Motley Fool follows a disclosure policy.

The Motley Fool is a content partner of YSL News, delivering financial news and analysis aimed at empowering individuals to manage their financial futures. The content is generated independently of YSL News.

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