"Hardware Defense" counters AI anxiety, Apple and the Nasdaq correlation hits a 20-year low

Amid the market volatility triggered by the wave of artificial intelligence, Apple is becoming a safe haven for investors. This tech giant’s correlation with the Nasdaq 100 index has fallen to its lowest level in nearly 20 years, offering a rare alternative for funds seeking to hedge against AI uncertainties.

According to data compiled by Bloomberg, Apple’s 40-day correlation with the Nasdaq 100 index dropped to 0.21 last week, hitting a new low since 2006. This correlation has been steadily declining since its peak of 0.92 in May last year, mainly because Apple has chosen not to participate in the AI arms race, making it an “outlier” among tech stocks. A correlation of 1 indicates perfect synchronization, while -1 indicates complete inverse movement.

This decoupling occurs as the market enters an “AI doom loop.” For over a month, investors have been oscillating between two concerns: the potential lack of returns on hundreds of billions of dollars invested in AI, and the risk of disruption across industries—from software to wealth management and logistics—by the same technology.

Apple happens to be free from either of these anxieties. The iPhone manufacturer has not engaged in the capital expenditure frenzy nor is it seen as threatened by tools like Claude under Anthropic PBC. In February, Apple rose 1.7%, while the Nasdaq declined 3.2%, and the Magnificent Seven index plummeted 7.2%, heading toward its worst monthly performance since March.

Unique Position Amid AI Volatility

Apple’s special status has garnered market favor. “Apple’s lack of correlation is a positive in the current environment,” said Art Hogan, Chief Market Strategist at B. Riley Wealth, which manages $25 billion. “We’re in a whack-a-mole environment for AI, with investors so nervous about the next disruption that they’re shooting first and asking questions later.”

Unlike most of its tech peers, Apple has not invested heavily in large-scale AI infrastructure. While it faces challenges integrating AI into its products, it is accelerating development of three AI-powered hardware devices. Its recent earnings report also highlighted positive trends: the company achieved a quarterly sales record, with strong performance from its core iPhone line, and issued an outlook for the current quarter that exceeded expectations.

“Hardware risks are much lower than software,” said Wayne Kaufman, Chief Market Analyst at Phoenix Financial Services. “Either way, you can’t use AI to invent a new iPhone for yourself.”

Market Performance of the Decoupling Trend

The divergence between Apple and tech stocks is striking. On Tuesday, Apple rose 3.2%, easily outperforming the Nasdaq 100’s 0.1% decline. This was the third time this month that Apple outperformed the index by at least 3 percentage points, including its best single-day performance in over a year on February 4.

This stands in sharp contrast to the broader tech sector. The Magnificent Seven index is heading toward its worst monthly performance since March, while Apple continues to rise against the trend. “It may have limited upside during a tech rebound, but I don’t think it will be sold off because it’s among the companies that seem least vulnerable to AI disruption,” Hogan said.

Challenges and Valuation Concerns

Despite its defensive qualities, Apple still faces numerous challenges. Last week, the stock plunged 8%, its largest drop since April. The 5% decline on Thursday was the worst since April’s tariff-related selloff, following a Bloomberg report that the company’s long-term plans to upgrade Siri might be delayed.

Rising memory chip prices have also become an increasing headwind, especially as Apple’s growth lags behind other tech stocks. Analysts expect its fiscal year revenue to grow 11% through September, but growth is projected to slow to 6.7% in fiscal 2027. Bloomberg’s compiled estimates also suggest earnings growth will slow next year.

The relatively moderate profit growth outlook results in a forward P/E ratio of about 30, based on estimated earnings over the next year, higher than all of its Mag7 peers except Tesla, and well above the Nasdaq 100’s multiple of 24. “Apple isn’t cheap; it’s been that way for a while, and it hasn’t really grown compared to other tech stocks,” Kaufman said. “But I think the market will continue to give it a trust vote.”

The “Hardware Defense” Investment Logic

Market enthusiasm for Apple reflects a preference for hardware amid AI uncertainty. The company is set to hold a product launch event in a few weeks, with investors betting that its hardware ecosystem can deliver relatively stable returns.

The core of this “hardware defense” logic is that Apple’s revenue base is built on physical product sales, which are less susceptible to direct AI replacement. In contrast, software and service companies face immediate threats from generative AI, while companies heavily investing in AI infrastructure carry uncertain return prospects.

In a market seeking certainty, Apple offers a rare option—neither betting on AI booms nor facing direct AI disruption. This middle ground is the fundamental reason for its sharply declining correlation and its unique defensive value amid tech stock turbulence.

Risk Warning and Disclaimer

Market risks are present; investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should evaluate whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Invest accordingly at your own risk.