Apple’s Worst Day Since August

The markets are buzzing with activity, and yesterday’s news gave us plenty to unpack. Let’s dive into the highlights, including Apple’s rough day, healthcare jitters, and surprising strength in the banking sector.

Apple’s Worst Day Since August 🍏

Apple (AAPL) stock dropped 4% yesterday, marking its steepest decline since August. The stock is now down nearly 12% from its December peak, making it the worst performer among the seven largest tech stocks so far in 2025.

Why the Drop?

1. China’s Weak iPhone Sales: Reports indicate lackluster demand for the iPhone in a key market, raising concerns about Apple’s growth prospects.

2. AI Not Delivering: Notable analyst Ming-Chi Kuo pointed out that Apple’s AI initiatives haven’t boosted iPhone demand as expected.

Investor Perspective:

While the news isn’t great, Apple remains a dominant player with a deeply loyal customer base and multiple revenue streams. For long-term investors, dips like these often represent buying opportunities in a high-quality name.

UnitedHealth Struggles with Rising Costs 🏥

UnitedHealth (UNH) saw its stock fall 6%, despite solid 2024 revenue growth of 8% to $400.3 billion. Wall Street zeroed in on rising costs and a stubbornly high medical loss ratio of 87.6%.

What’s Spooking Investors?

• Cost Pressures: Rising hospital bills, expensive drugs, and Medicaid reimbursement challenges are squeezing margins.

• Slow Medicare Enrollment: Numbers came in below expectations, adding to concerns about growth.

The Bigger Picture:

UnitedHealth still boasts strong cash flow and continues to grow its patient base, adding 600,000 value-based care enrollees in 2024. For long-term investors, the scale and resilience of UnitedHealth could make this dip an opportunity, though cost pressures will remain a story to watch in 2025.

Banks Lead the Pack 🏦

In contrast to Apple and UnitedHealth, Bank of America and Morgan Stanley delivered stellar earnings reports, showcasing the resilience of the U.S. financial sector.

What Happened?

1. Bank of America (BoA):

   • Strong performances on Main Street (net interest income from loans) and Wall Street (trading and dealmaking fees) powered BoA past analyst expectations.

   • BoA projected $14.5 billion in net interest income for Q1 and $15.5 billion for Q4, driven by demand for loans and higher interest rates.

2. Morgan Stanley:

   • The star of its quarter? Investment Management, which delivered stable, predictable revenue growth.

   • A surprise drop in expenses also helped Morgan Stanley crush profit predictions.

Why This Matters:

• Positive Signals for the Economy: The strong results from BoA and Morgan Stanley suggest robust loan demand and healthy dealmaking activity.

• Balanced Growth: These banks are thriving across both consumer banking and investment operations, indicating resilience despite broader economic uncertainties.

Semiconductors Shine 💻

TSMC, the Taiwan-based semiconductor powerhouse, reported an impressive 39% revenue growth and 57% profit increase in Q4. The company plans to invest heavily—up to $42 billion this year—to meet skyrocketing demand for AI-related chips.

Why This Matters:

• TSMC is a cornerstone of the global AI boom, supplying chips to tech leaders like Apple and Nvidia.

• Despite geopolitical tensions, the company expects to retain most of its Chinese orders, a testament to its dominance in the market.

The Bigger Picture:

The AI sector continues to be a growth engine, with semiconductors as its backbone. TSMC’s optimism reflects a promising outlook for the entire chip industry.

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The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.