Tech Stocks: Profit-Taking Amid Geopolitical Uncertainty

Tech stocks, especially Apple, face profit-taking amid geopolitical risks and uncertain iPhone demand.

### Key Risk Aversion in Tech Stocks Amid Geopolitical Uncertainty
* 📉 Today marks a significant risk aversion trade, particularly impacting the **tech sector**, which has previously shown **strong performance this year**.
* 💻 Major tech stocks, including Apple and various video chip makers, are experiencing notable declines as investors engage in **profit-taking amid rising geopolitical risks**.
* 📱 Apple, in particular, is facing heightened scrutiny over its iPhone 16 sales, with concerns emerging regarding **supply chain issues and demand levels**.
* 🔍 Barclays has indicated that demand for the new iPhone may not meet **optimistic expectations**, while Citi has adjusted its forecasts, lowering projections for this year but **raising them for next year**.
* 📅 The anticipation surrounding the iPhone has shifted, suggesting that the **expected upgrade supercycle may be more of a 2025 narrative** than a 2024 one.
* 🔄 Despite the current downturn, there remains a belief that big tech could serve as a **defensive investment**, given its **strong cash flows** and **durable earnings growth**.
* 💡 Investors may view tech stocks as a **safe haven during uncertain times**, even as concerns about **high valuations** linger in the background.

This is a key risk aversion trade today. Yes, absolutely. We are seeing pretty broad-based weakness across equities, but certainly tech, especially since this is a group that has done pretty well this year. It seems like they are taking some of the initial profit-taking here, some of the bigger moves, companies like Apple and video chip makers broadly. All of these are stocks that have been taking a bit of a drop today on the geopolitical risk and the kind of increased uncertainty surrounding that. There are individual names that we want to call out because while there's the mood music and then there's the micro news with Apple falling, for example, significantly. This on the back of once again anxieties around the iPhone 16 sales. Who's been cutting back on that particular name? Very worried about in the supply chain as well. Yeah, so there has been a lot of concern about Apple, just a lot of focus on the

upcoming iPhone, which is the one that's going to have features. They're getting some early reads on demand. If you're looking at preorders and lead times and things like that. And today we had Barclays come out and kind of, you know, is the latest firm to kind of say maybe demand here isn't as strong as people were kind of hoping or expecting. There was a lot of optimism built around the idea that the iPhone was going to lead to this big upgrade supercycle. People still kind of expect, you know, pretty strong growth out of the iPhone over the longer term. But maybe this is going to be more of a 2025 story than a 2024 story. Citi also came out today. They're lowering their iPhone unit forecast for this year, but raising them for next year, kind of saying once these features are available, then we might see, you know, more people looking to upgrade them.

But for the moment, you know, given how much Apple has been up since April, it seems like this is a name that people are, you know, taking some profits in, especially when you have this sort of additional question mark, both a geopolitical risk, but also the iPhone pre-order sales run pushing us forward when we see these sorts of SNAP moves. Apple is an ongoing narrative, but more broadly in the market today, do you expect people - I hate to use the turn of phrase, but buy the dip. That's a great question. And, you know, one thing I've heard is that people kind of look at big tech as a more defensive place in the markets, if not a traditional defensive sector, but given strong cash flows, pretty durable earnings growth, pretty good revenue growth, pretty positive demand tailwinds, especially when you consider interest in AI and so forth, that people have been always looking to big tech as

a area to go into in periods of heightened uncertainty. They have some safe harbor sort of characteristics, although there are some concerns about valuations given how much they've moved up this year. Would not surprise me if you did see people, you know, looking around saying there's a lot of uncertainty right now. Tech looks like a place of relative certainty, and they're willing to pay up for that.

Apple Falls as Analysts Debate iPhone Demand Trends

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Bloomberg Technology

There is broad-based weakness in equities, particularly in the tech sector, as profit-taking occurs after a strong year.

Apple's stock is significantly dropping due to concerns around iPhone 16 sales and supply chain issues.

Barclays and Citi have both adjusted their iPhone unit forecasts, indicating that strong demand and growth may be more likely in 2025 rather than 2024.

Apple's Profit-Taking and Market Dynamics

Apple's stock has risen significantly since April, leading to profit-taking amidst geopolitical risks and iPhone pre-order sales.

The ongoing narrative around Apple is coupled with a broader market trend, where big tech is seen as a defensive investment due to strong cash flows and durable earnings growth.

The positive demand tailwinds, particularly from AI interest, have made big tech a desirable sector for investors.

Tech companies are seen as a safe harbor during periods of heightened uncertainty, attracting investors despite concerns about high valuations.

The sector's relative certainty is driving people to seek opportunities in tech.

This trend of paying a premium for tech investments is expected to continue amidst ongoing uncertainty.