After nearly two years, Apple has lost its title as the world’s most valuable company by market capitalization. It has been replaced by Saudi Arabian oil and gas producer Saudi Aramco, which in turn has been helped by the global rise in the price of these commodities.
The change is rather symbolic but shows how markets are changing as the global economy grapples with rising interest rates, inflation, and problems in supply chains.
We can see a change in sector preferences in the markets
At the beginning of the year, Apple’s market value was $3 trillion, roughly $1 trillion higher than Aramco’s. Since then, however, Apple’s shares have fallen by about a fifth while Aramco’s have risen by 28%.
This week, the company’s market value hit $2.37 trillion. Aramco’s shares, on the other hand, are trading near their record high, with a market capitalization now exceeding $2.4 trillion.
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Rising oil prices are great news for Aramco’s profits, which more than doubled last year. But at the same time, it is fueling inflation, forcing the US Federal Reserve (Fed) to raise interest rates at the fastest pace in decades. With the rate hikes, investors are lowering estimates of future earnings for technology stocks, pushing down their share prices.
As we outlined in our recent article on the Fed’s actions, the Fed’s comments suggest that things don’t look promising for these big tech giants. The Fed is likely to raise rates again later this year. In addition to this, it looks like the situation in Ukraine will not be resolved for some time, and so the increased geopolitical risk will continue to have a negative impact on the global economic situation.
Apple is still a stable company despite the difficulties
But Apple’s recent results also highlighted the difficulties the company is facing due to supply constraints. However, in terms of numbers, Apple is still showing attractive growth in almost all parts of its business. Thus, Apple shares continue to be considered relatively safe within the sector.