UBS Analyst Calls Apple’s $500 Billion Investment Plan Unrealistic

Apple Inc. AAPL has announced an ambitious plan to invest $500 billion in the U.S. over several years. However, this announcement has raised eyebrows among financial analysts. Notably, David Vogt, an analyst at UBS, has voiced considerable skepticism about the feasibility of this plan.

What Happened: In a recent communication to investors, Vogt outlined several reasons for his doubts regarding Apple’s grand investment strategy. He noted that currently, only about 10% of Apple’s supply chain is based in the U.S., while the bulk of its operations are concentrated in Asia, particularly in countries like Taiwan and China. Vogt pointed out that even reaching this 10% of U.S. supply chain took Apple nearly a decade to accomplish.

Vogt stated, "While the headline figure on the surface is a large number, we believe it lacks substance at this juncture based on history." This remark underlines his belief that despite the impressive figure, the practical reality of implementing such a vast investment may not hold up.

Furthermore, the analyst raised questions about the financial viability of the investment plan. He estimated that hiring an additional 20,000 employees could lead to an increase of around $5 billion in annual operating expenses. He also highlighted that Apple currently spends about $10 billion annually on data centers while generating around $100 billion in free cash flow, of which $90 billion is typically allocated for stock buybacks.

In light of these financial figures, Vogt expressed doubts about where Apple would source the funding necessary to support the $125 billion annual investment required by this new plan. He suggested that it seems highly unlikely for Apple to reduce its share buybacks and referred to the $500 billion investment over a four-year span as "completely unrealistic mechanically." Vogt questioned, "it's unclear where the cash flow comes from to try to even remotely attempt this."

Why It Matters: Apple has a history of announcing significant investments in the U.S. economy. For instance, in 2018, the company pledged a $350 billion contribution, which was later increased to $430 billion in 2021. Another analyst, Dan Ives from Wedbush Securities, previously described such announcements as strategic moves to enhance Apple's manufacturing presence and align with political push for increased U.S. investments, particularly during the Trump administration.

In addition to Vogt's skepticism, short-seller James Chanos has echoed similar concerns regarding the realism of Apple's $500 billion investment, especially considering the company’s existing capital base, which is below $160 billion.

However, there are other perspectives in the market. For example, Gene Munster of Deepwater Management believes Apple is poised to ramp up its annual U.S. investments by $39 billion, representing a 45% increase from the current investment rate observed in 2021. Munster also estimated that the actual additional investment per year might be closer to $20 billion. He further added that avoiding tariffs could potentially save Apple nearly $11 billion annually.

Apple, Investment, Analyst