Stocktake: Is Apple really worth $2tn?

Apple continues to defy the law of large numbers, becoming the first $2 trillion (€1.7 trillion) company in the US just two years after it first surpassed the $1 trillion level.

Company growth rates typically slow down once they reach a certain size, but not Apple. Up almost 60 per cent in 2020, the stock has more than doubled since bottoming during mid-March’s market panic.

Apple's performance has been exceptional – "We and consensus weren't even in the ballpark in terms of what was possible," said Goldman Sachs after Apple trounced earnings expectations last month. That was echoed by technology investor Gene Munster, who admitted analysts had expected Apple's numbers "to be noisy, magnified by the pandemic. We were wrong."

Still, have markets gone from being too pessimistic about Apple's prospects to being too optimistic? When Apple surpassed the $1 trillion level in 2018, it traded at a discount to the wider market and its price-earnings ratio was less than 70 per cent of S&P 500 stocks. Today it trades on 35 times earnings, a hefty premium to the index and roughly double what it was two years ago. In 2018 Apple accounted for 4 per cent of the S&P 500, compared with almost 7 per cent today – the highest index weighting in 40 years, making it even more dominant than IBM in the mid-1980s.