Apple’s Core Strength: Will AI Keep AAPL from Going Rotten?
Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in AAPL.
Shares of Apple, Inc. (Ticker: AAPL) have emerged as a leading performer within the Magnificent Seven cohort over the past few months. The company has made some promising recent announcements on the smartphone front, a pillar of their business. But will the stock be able to overcome rising concerns over a potential economic slowdown?
iPhone, Meet Artificial Intelligence
Apple’s impressive rebound earlier this year is now being attributed to the launch of Apple Intelligence, which features its suite of artificial intelligence (AI) features that are going to be embedded into its products such as iPhones, iPads, and MacBooks.
Apple also plans to launch a new generation of AI-enabled smartphones that could lead to a new flurry of device purchases from consumers in the coming months. Apple Intelligence will become available for iPhone 15 Pro models, iPads, and MacBooks with M1 or more powerful chips.
This creates a unique scenario whereby the only way for users to gain access to artificial intelligence technology would have to upgrade their smart devices, which is a major revenue-generating catalyst for Apple.
Traders that think the potential for AI could translate into a significant rally in Apple may find an opportunity with Direxion’s Daily AAPL Bull 2X Shares (Ticker: AAPU), which seeks daily investment results, before fees and expenses, of 200% of the performance of common shares of Apple, Inc. (Ticker: AAPL).
Below is a daily chart of AAPL as of August 22, 2024.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
The slanted blue lines represent an uptrend. An uptrend describes the price movement of a financial asset when the overall direction is upward.
Recession Risks Weigh
Despite the prospects for a major surge in mobile device shares, such optimism could easily be derailed if the economy begins the slow, and the consumer cuts back on discretionary purchases.
The rate of economic growth has been decreasing, but we’re still far from being in an official recessionary status. The second quarter Gross Domestic Product (GDP)* revision was released on August 29. The previous reading was 2.8%, and anything lower could legitimize economic slowdown concerns.
Further out, traders may want to watch for Apple’s next earnings report on October 23. Their recent results showed a solid 5% revenue increase, which is impressive given the size and scale of the company.
Traders concerned that an economic slowdown could affect Apple’s top and bottom lines may find a trade with Direxion’s Daily AAPL Bear 1X Shares (Ticker: AAPD), which seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of common shares of Apple, Inc. (Ticker: AAPL).
Individual Equity and Leveraged Sector Plays
Direxion offers traders additional individual equity plays aside from Apple. These include stocks like Microsoft, Meta, Nvidia, Amazon, and more. Investing in the Funds is not equivalent to investing directly in the underlying stock.
The Direxion Daily MSFT Bull 2X Shares (Ticker: MSFU) seeks daily investment results, before fees and expenses, of 200% of the performance of Microsoft Corporation common stock, while the Direxion Daily MSFT Bear 1X Shares (Ticker: MSFD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of Microsoft Corporation common stock.
The Direxion Daily META Bull 2X Shares (Ticker: METU) seeks daily investment results, before fees and expenses, of 200% of the performance of Meta Platforms, Inc. common stock, while the Direxion Daily META Bear 1X Shares (Ticker: METD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Meta Platforms, Inc. common stock.
The Direxion Daily NVDA Bull 2X Shares (Ticker: NVDU) seeks daily investment results, before fees and expenses, of 200% of the performance of NVIDIA Corporation common stock, while the Direxion Daily NVDA Bear 1X Shares (Ticker: NVDD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of NVIDIA Corporation common stock.
The Direxion Daily AMZN Bull 2X Shares (Ticker: AMZU) seeks daily investment results, before fees and expenses, of 200% of the performance of Amazon.com, Inc. common stock, while the Direxion Daily AMZN Bear 1X Shares (Ticker: AMZD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Amazon.com, Inc. common stock.
Traders looking to speculate on the tech sector with leverage may be interested in Direxion Daily Technology Bull 3X Shares (Ticker: TECL) and Daily Technology Bear 3X Shares (Ticker: TECS), seek daily investment results, before fees and expenses, of 300%, or -300%, respectively, of the performance of the Technology Select Sector Index*.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Apple Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Apple Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Apple Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Apple Inc. could affect the value of a Fund’s investments with respect to Apple Inc. and therefore the value of the Funds.
Technology Sector Risk — The market prices of technology related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. Technology securities may be affected by intense competition, obsolescence of existing technology, general economic conditions and government regulation and may have limited product lines, markets, financial resources or personnel. Technology companies may experience dramatic and often unpredictable changes in growth rates and competition for qualified personnel. These companies are also heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely impact a company’s profitability.
Apple Inc. Investing Risk — In addition to the risks associated with companies in the technology sector, Apple Inc. faces risks related to market conditions, market disruptions, competition, managing the frequent introductions and transitions of products and services; as well as the outsourced manufacturing and logistical services provided by partners. Issuer-specific attributes may cause an investment held by a Fund to be more volatile than the market generally. The value of an individual security or particular type of security may be more volatile than the market as a whole and may perform differently from the value of the market as a whole.
Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund's investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning. Risks of the Funds include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Apple Inc. Investing Risk, Market Risk, Industry Concentration Risk, Indirect Investment Risk, Cash Transaction Risk, and risks specific to the technology sector. Additional risks include, for the Direxion Daily AAPL Bull 2X Shares, Leverage Risk and Daily Correlation Risk, and for the Direxion Daily AAPL Bear 1X Shares, Shorting or Inverse Risk as well as Daily Inverse Correlation Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of the Funds.