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Is Apple 'in stealth mode' while acquiring AI companies?

In another installment of Yahoo Finance's Good Buy or Goodbye, RSE Ventures Co-Founder and CEO Matt Higgins joins Josh Lipton to share his insights into iPhone maker Apple (AAPL) and chip company Arm Holdings (ARM).

Higgins names Apple shares as his good buy, stating that the tech leader may be on the up-and-up after the stock slid in 2024's first quarter. Higgins points to Apple's quick adoption and integration of AI into its devices as a major catalyst.

"They have been gobbling up AI companies below the radar — I think they've bought 32 of them," Higgins says. "Clearly they're working on it because If they don't they're facing an existential threat to their very survival. I think Apple has been keeping its head down while its stock has faltered."

Arm is the stock Higgins would wish to say good buy to, calling the semiconductor designer overvalued as early investors were "looking for different ways to chase Nvidia (NVDA)" in the broad chip landscape.


Catch more of Good Buy or Goodbye here, or watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video transcript


JOSH LIPTON: It's a big noisy universe of stocks out there. Welcome to Good Buy or Goodbye. Our goal to help cut through that noise to navigate the best moves for your portfolio.

Today, we're looking over the artificial intelligence landscape and how the AI boom extends past the semiconductor industry. Let's bring in Matt Higgins, RSE Ventures co-founder, and CEO.

Matt, it is good to see you. So let's get you your first buy here, Matt. Now, it's a name that some investors have been kind of skeptical of year-to-date, they have their concerns.

It's Apple. You say this is one to own, though. So let's go through the reasons. One, you say Apple getting ahead on AI acquisition. Walk us through that.

MATT HIGGINS: Yeah, first of all, I've been really hard on Apple the last year, saying like, what are you doing? You use Siri. And it feels like the 1990s are calling they want their phone back.

So but Apple might be in stealth mode. They have been gobbling up AI companies below the radar. I think they've bought 32 of them.

And so clearly, they're working on it. Because if they don't, they're facing an existential threat to their very survival. So I think Apple has been keeping its head down while its stock has faltered.

JOSH LIPTON: It's a good point. Because often with, Apple, they're not known for big splashy acquisitions. But they do make a lot of small acquisitions. Next point here, you say AI-integrated iPhones are on the way. And you think that's going to attract those upgraders.

MATT HIGGINS: Yeah, there's amazing catalyst coming. So if you look at Apple compared to the Magnificent Seven, it's been like the malevolent one, if you're a shareholder. So it's terrible. S&P up 25%. It's flat for a year.

However, though, Apple at the end of the day, has data. It has proximity to the customer. If you think about using ChatGPT, it's kind of a crappy experience. You want to be able to go onto your phone.

So they have an ability to go directly to the customer. They have 50% market share into the US. So it makes sense that Apple will dominate. But most importantly, it has a catalyst coming on June 10th. It's developer conference.

JOSH LIPTON: That big software show. And finally, another point here. Could provide the fastest road to AI adoption? What do you mean by that, Matt?

MATT HIGGINS: Yeah, once Apple launches something, everybody's paying attention to it. So they haven't had like that hot killer feature that's made you lean into their upgrade cycle. But they have a new phone coming out, the iPhone 16, new update coming out, iOS 18. So if they get this right, which I think they're going to, instantly, everyone is going to be integrating AI into their lives.

No, we hear this argument from some Bulls, Matt. And it's a good one, which is that as AI moves from data center to edge, Tim Cook, he controls the software, the hardware, the chips when he wants to. He can move very quick.


JOSH LIPTON: Finally here, what is the risk to this call, though, Matt?

MATT HIGGINS: All right. Well, so, I'm an attorney. I don't practice. I graduated law school. So I'll put my lawyer hat on. This is a terrible case.

Now, however, I could be wrong. The Department of Justice is coming after. Apple saying that it has a monopoly. I think it has a lot of market dominance.

But it is not a monopoly. But you never know. So that is a risk.

JOSH LIPTON: OK, moving on here. So Apple, we know you like. Let's talk about when you don't like, which is arm.

This one, Matt, you are telling people is one to avoid. Let's walk through the reasons. One is just valuation.

MATT HIGGINS: Yeah, look, I took part in the IPO. I was happy to ride along. It opened up at $55.

It shot all the way up to 140. But at the end of the day, Arm was relatively early in the AI splash. People were looking for different ways to chase NVIDIA.

As the market becomes more sophisticated, they start realizing that wait a second, Arm is way overpriced relative to its peers. 100 times forward earnings. There's just a lot better ways to play it. So I'm not a buyer here at this price.

JOSH LIPTON: And your second point, we were talking off camera, Matt, about this. Really what you're saying here is, in your opinion, Arm is just sort of it's commoditized, in your opinion, versus rivals.

MATT HIGGINS: Right. So it doesn't have a moat. Most people don't have a moat. But, in this case, there are some who actually do have a tremendous advantage Taiwan, Semiconductor NVIDIA, that is not Arm. Arm sells microprocessors, it's an IP enabler.

But at the end of the day, they don't have pricing power as evidenced by the fact that they can't get Apple to pay more than $0.30 for licensing their microprocessors. They have no pricing power. So that limits their upside.

JOSH LIPTON: And final reason you would avoid this one, Matt. You say basically, you're asking is arm following NVIDIA's lead.

MATT HIGGINS: Yeah, I'm basically saying it's been bid up because of the frenzy. The AI phenomenon is very real. There's going to be a lot of money made over the long term. But as the customer gets more sophisticated, the market gets more sophisticated, they're going to look for better ways to play it.

The reason why I think it's held up well is that SoftBank owns 89% of Arm. So what if SoftBank tires of it and needs liquidity and starts to shed that stock thing to watch out?

JOSH LIPTON: Yeah, concentrated ownership. And finally here, Matt, same question. Where could you be wrong on this one? What's the upside risk?

MATT HIGGINS: Yeah, two things. One, Google just announced a partnership with Arm. It's going to lean on Arm to go ahead and try to create an NVIDIA competitor. I don't buy it. But it's possible.

And the second thing, it might take some time for the market to figure out that Arm is, in fact overpriced. So maybe you have some time to ride along.

JOSH LIPTON: All right, Matt, let's sum this all up for viewers right now. You're telling investors buy Apple as it bolsters its AI capabilities through acquisitions. And its influence potentially driving consumer adoption of AI in unprecedented scale. On the other hand, though, you're saying avoid Arm as it is overvalued, more commoditized versus rivals. And ownership, just to concentrate traded.

Thanks so much for watching Good Buy or Goodbye. We'll be bringing you new episodes three times a week at 3:30 PM Eastern.