Aramco Vs Apple

Updated: Jun 5

Apple loses its top spot as world’s most valuable company.

Two weeks ago, amid surging commodity prices and a ruthless bear market, Saudi Aramco, a public petroleum and natural gas company, overtook Apple to become the world’s most valuable company at around $2.43tn.


In early January of this year, Apple had become the first company with a price tag of $3tn, more than the United Kingdom’s GDP in 2020 (acquisition coming soon?). The tech giant has dominated stock markets for over a decade, alongside Amazon, Alphabet and Microsoft, earning a reputation for being the ultimate blue chip. It’s no surprise either, Apple’s net profit margins have stayed well above 20% for the past 13 years, and its stock price entered 2022 at $182 per share.

However, 2022 has presented new challenges for companies, governments and economies, with the war in Ukraine creating great hardship for people around the globe, tightening monetary policy making investors tremble, and a bear market engulfing stocks in a wave of crimson. Amid this turmoil, surging commodity prices, a consequence of the Russia’s invasion, have boosted oil companies profits to tremendous levels.


One oil company in particular, Saudi Aramco, was boosted so much by the increase in prices that it overtook Apple to become the world’s most valuable company, standing just shy of $2.5 trillion. The top spot is familiar territory for Aramco, claiming the title in December 2019 before being ousted by Apple in the summer of 2020, as the pandemic brought about fresh demand for technology.

Although the current economic climate can be looked to as the cause of Apple’s toppling from the top seat, Aramco’s unique low-cost of production, thanks to its easy-to-tap fields, means it stands firm in profitability, rivalling la crème de la crème of Silicon Valley. YTD, the Saudi Arabian Oil Company has seen its share price rise by over 25%, against Apple’s 17.78% decline. Economic pressure cannot be blamed as entirely responsible for Apple’s downfall either, with the threat of unionization among retail workers ever prevalent in the US, as we have recently seen with Amazon in New York.


The discussion around the future of Apple, and by extension, stocks overall, is rife with conflicting forecasts. Famous Big Short investor, Michael Burry, has had a $36m bet against Apple since March 31st. Yet, some investors remain bullish and view this slump in the market as a perfect buying opportunity, as after flirting with bear market territory for days, stocks are showing signs of rebounding, with the FTSE 100 adding 20 points, and the S&P 500 rallying 2.5%.

Others remain more concerned, believing that Aramco’s dethroning of Apple is symbolic of the economic quagmire we are currently experiencing.


Whilst I am sure investors are looking forward to a bit of greenery, and Aramco’s executives are happy with their bulging profits, the surging commodity prices are a stark reminder of the world we live in; war raging in Eastern Europe, income-squeezing inflation, and energy bills growing at a rate that shows no sign of stopping.

 

Edited and Reviewed by Deborah Ikomi

 

References/Wider Reading

https://www.theguardian.com/business/2022/may/12/saudi-aramco-overtakes-apple-worlds-most-valuable-company

https://www.macrotrends.net/stocks/charts/AAPL/apple/profit-margins

https://www.theguardian.com/business/2022/may/15/saudi-oil-giant-aramco-reports-82-rise-in-quarterly-profits-to-record-395bn

https://www.theguardian.com/business/2019/dec/11/saudi-aramco-shares-soar-as-it-becomes-world-largest-listed-company

https://markets.businessinsider.com/news/stocks/big-short-michael-burry-scion-stock-portfolio-apple-alphabet-meta-2022-5

https://www.proactiveinvestors.co.uk/companies/news/983415/ftse-100-led-higher-by-scottish-mortgage-trust-as-tech-stocks-fly-out-of-the-traps-in-new-york-983415.html

https://www.reuters.com/markets/europe/futures-inch-up-ahead-economic-data-gap-slumps-outlook-cut-2022-05-27/

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