Cast your mind back to 2007 - that was the year when Apple’s boss Steve Jobs revealed the iPhone to the world. We didn’t know it at the time, but it marked the point when Apple set on a course to become the world’s largest company.
Back then, at the beginning of 2007, Apple’s share price was around $11, giving it a market cap of around $57 billion. Some said the company was absurdly over-priced, after-all, five years earlier shares were trading at around $1, market cap around $5 billion - “how could an $11 share price be justified?” asked the cynics - “it was the stuff crashes were made of, and investors were chasing a naive dream,” or so they argued.
Well, forward wind the clock to Q4 of 2017, and the company made a profit of $10.7 billion. Just to be clear, that’s in just one quarter.
It’s not people who bought shares in the company back in 2007 who look like fools, it is those who criticised them.
Look at it another way. Cast your mind back to October 7th, 2011. On that day in history, and for a brief few minutes, Apple was the world’s largest company, valued at a smidgeon over $337 billion. “How absurd” said critics, who compared Apple with the company it had displaced at number one: Exxon Mobil, “now there’s a company with a proper product - oil” they said. Yet, Apple soon returned to number one and has stayed there since, with just a very brief interruption at the top spot by Alphabet in 2017.
Yet, for a few minutes on November 3rd 2017, Apple was valued at just over $900 billion, at the time of writing, shares are trading at $172. Shares have increased by 56 per cent in just 12 months. At that growth rate, Apple could break the one trillion dollar valuation before the year is up.
One day people will stop buying iPhones, but it seems unlikely that day will dawn soon, the $1,000 iPhone X, with its augmented reality and face recognition features, is reportedly selling out, shifting off the shelves like hot cakes, and most certainly not like a sticky apple. The Apple turnover, or quarterly revenue, topped $52 billion and before the iPhone X hit the shelves.
But there is a threat to Apple, not the kind of threat that might see it becoming another Kodak, Blackberry or Nokia, but it may lose its mantle as the world’s biggest tech.
The reason for that lies in part with Moore’s Law, in part with AI and in part with the cloud.
Moore’s Law is slowing - that is especially significant, as it was the march of Moore’s Law, which describes how computers double in speed every 18 months, that made the iPhone possible in the first place.
This does not mean the end of advances in hardware. Graphene as an alternative to silicon, and quantum computing will ensure the computer of 2027 will be many times more powerful than the computer of 2017.
But AI is the technology the tech world is talking about, and it’s neural networks that are giving AI its advances, and no iPhone is likely to have its own neural network soon, that instead, is the domain of the cloud.
And that’s the point. To have the latest AI driven applications on your phone, you don’t need an ultra-fast, state of the art processor, you just need a decent internet connection and access to an AI system in the cloud.
And the market leaders in AI are Amazon, Alphabet, maybe even Big Blue itself - IBM, and then there is China, which is surely only a few years from over-taking the US in AI.
Apple will surely remain a great company for a long time - but biggest in the world? Within two years that title may belong to Amazon or Alphabet, within five it may be a company from beyond The Great Wall of China.