Why is Apple stock lagging the S&P 500 in 2025?

Following Nvidia stock’s recent dip, Apple (NASDAQ: AAPL) has once again taken the crown of the S&P 500‘s largest company. This is the case even after the iPhone maker’s 9.3% year-to-date share price fall. The stock underperformed the index in the process.

Having said that, I’m sure longer-term shareholders aren’t too worried. Apple stock is still up 270% in five years, pushing the market cap well above $3trn.

For context, that’s over than 100 times larger than Nokia, the firm that Apple disrupted with the launch of the groundbreaking iPhone in 2007.

What’s going on?

There seem to be a few reasons why Apple stock has paused for a well-deserved breather in 2025.

For starters, the technology sector has suffered a sell-off in the past couple of weeks. President Trump’s on-off tariffs are causing uncertainty in the stock market, and they could even impact the firm’s earnings at some point. While these risks linger, the Apple share price is likely to be volatile.

Also, the stock is trading at 34 times earnings, which is a premium to the already pricey S&P 500. So there might be a concern about valuation here. And this was likely a factor in Warren Buffett’s decision to cut his giant stake to less than half what it was.

Finally, Apple has suffered a slowdown in iPhone sales, especially in China. This is down to increased competition and market saturation, as well delays in rolling out significant AI upgrades for its devices.

AI teething problems

This last point is worth expanding on, as some investors fear that Apple might be losing ground as we move deeper into the AI age. It has released Apple Intelligence on the new iPhone 16, but the AI-equipped version of Siri has been delayed due to glitches. This reportedly might not be out till next year now.

While this is clearly far from ideal, I think the company has time and will get this right. After all, it will take several years for all 2bn+ iOS users to upgrade to devices with advanced AI capabilities.

Apple has said its AI features will prioritise keeping data on users’ devices rather than in the cloud. This could attract users concerned about data privacy.

I suspect these are AI teething problems that will be largely forgotten about a few years from now. As a customer, it’s not a deal-breaker for me, as I’ll still be upgrading to a new Apple phone soon. I’m more than happy to be locked into the firm’s incredibly sticky ecosystem.

Will I buy the stock then?

Analysts expect revenue and earnings per share to grow 4.6% and 8.6% respectively this year. That’s not particularly high growth for a stock that is trading at 29 times forward earnings.

Of course, it goes without saying that Apple is an incredible company and brand. It generated over $100bn in free cash flow last year and announced a $110bn share buyback programme in May. That was the largest in US corporate history!

However, due to the premium valuation and modest top-line growth, I’m in no rush to buy Apple shares today. I think there are potentially better options for my portfolio.

The post Why is Apple stock lagging the S&P 500 in 2025? appeared first on The Motley Fool UK.

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Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.