Apple Inc

Apple is positioned to benefit from the rapid adoption of artificial intelligence and digitization, which is driving exponential demand for computing power and efficiency tools. The company is highlighted for its hardware ecosystem and services, which are integral to this trend. The manager notes that Apple, along with Amazon, is trading at reasonable valuations given its strong prospects, making it a selective investment in the technology sector. This strategic positioning allows Apple to capitalize on the ongoing digital transformation and maintain a competitive edge.

While Apple has overlapping network effects and powerful switching costs that create strong current pricing power, we have grown concerned that Apple’s high margin services business may be undermined by price-shopping AI agents that evade Apple’s large app store toll. Additionally, the company’s supply chain in China would cost more in time and money to replicate in the event of a war than we previously understood. These factors lead us to believe that Apple faces significant long-term risks to its pricing power.

The letter discusses the performance of the Core Portfolio and mentions Apple among other companies that were strategically trimmed due to their higher price-to-earnings ratios. However, there is no specific argument made about Apple's future performance or valuation.

Apple: AAPL underperformed in Q2 despite reporting solid results. The company posted revenue of $95.4 billion and EPS of $1.65, with growth in both iPhone and Services. However, investor response to Apple’s AI roadmap, unveiled at WWDC in June, was mixed. While Apple introduced several new on-device AI features under its 'Apple Intelligence' initiative, the market viewed the rollout as more incremental compared to peers. We believe Apple’s long-term value proposition remains compelling. Its installed base of over 2 billion active devices provides a foundation for recurring services growth and platform monetization. The company’s AI strategy, though cautious, emphasizes security and device performance, key differentiators that may resonate with consumers over time. With robust free cash flow and continued capital return, we remain confident in Apple’s positioning.