Apple's $500 Billion U.S. Investment and Potential Tariff Savings

Deepwater Management‘s Gene Munster has provided an analysis regarding Apple’s recent commitment to invest $500 billion in the United States.

What Happened: On Tuesday, Munster shared his insights on Apple Inc. (NASDAQ:AAPL) increasing its annual U.S. investments. He believes that this tech giant will raise its U.S. expenditures by $39 billion, marking a 45% increase from the run rate outlined in 2021. However, he clarifies that the actual incremental investment is likely to be closer to $20 billion per year.

Munster highlights three key points from Apple’s investment announcement:

1. The math indicates a significant rise in Apple’s annual U.S. expenditures, estimated at $39 billion, but the additional investment may only reach about $20 billion a year.
2. He also notes that a portion of the minimum $19 billion incremental spending will be focused on workforce expansion, including hiring 20,000 new employees, which adds approximately $3 billion in annual payroll costs. The remaining funds will go towards enhancing infrastructure, particularly in data centers and chip production for products like Apple Watches and iPads.
3. Another critical point Munster raises is Apple’s strategic move to avoid tariffs. With approximately 35% of its total sales—translating to roughly $147 billion this year—coming from the U.S., Apple could save about $11 billion annually by increasing its domestic investments and sidestepping tariffs of around 10% that could impact product sales.

This means that the potential savings from tariff avoidance may offset a significant portion of the new U.S. investments.

Why It Matters: This massive investment by Apple, led by CEO Tim Cook, is perceived as a strategic maneuver to counteract the potential threat posed by tariffs. Tariffs have remained a substantial concern for Apple, with some analysts projecting that iPhone manufacturers would need to raise prices of their devices by about 9% to counteract the effects of the tariffs.

In response to these developments, former President Donald Trump indicated that such a significant investment by Apple is a reflection of their confidence in his administration and its policies.

While Gene Munster offers a positive perspective, other analysts have voiced skepticism regarding Apple's investment. For instance, UBS analyst David Vogt described the announcement as lacking substance, while noted short-seller James Chanos referred to it as unrealistic, especially given that Apple's capital base is less than $160 billion. Conversely, Wedbush’s Dan Ives believes that Apple’s investment represents a smart strategic move toward enhancing its infrastructure in the U.S.

This news positively influenced Apple’s stock, which closed 0.66% higher at $247.17 on Monday.

Image via Shutterstock

Apple, Investment, Tariffs