The Chinese market and the competitive environment there are presenting the iGroup Apple and the electric car pioneer Tesla with ever greater challenges. Experts are now warning that stocks may no longer be particularly “safe investments”.
• Difficult environment in China for Apple and Tesla
• Tough competition forces corporations to reduce prices
• Should Apple and Tesla stock investors rethink now?
The economy in China has recently come under pressure – the growth figures were disappointing. China’s GDP rose slightly in the fourth quarter, but it remained well below expectations. The stock markets are also not spared from the worsening mood. These developments are now increasingly being felt by Apple and Tesla in particular. Market observers warn that US companies are likely to face further problems, according to MarketWatch.
Apple shares and Tesla shares under pressure
Apple shares have increased in value by over 0.7 percent since the beginning of the year – most recently they cost $193.89 on the NASDAQ (as of the closing price on January 21, 2024). Microsoft was recently able to temporarily overtake the iGroup as the most valuable company in the world.
Meanwhile, Tesla shares have already fallen by more than 15.97 percent this year, most recently to $208.80 (as of January 22, 2024).
Both companies are increasingly struggling with weak sales in China. Apple recently responded by cutting the price of the iPhone 15 by up to 500 yuan, or up to five percent. Because competitors like Huawei, Xiaomi & Co. are hot on the heels of the Cupertino company. Tesla had previously reduced its prices for the Model 3 and Model Y in China due to competition from BYD & Co.
Experts warn of tough competition
In a recent note to customers, Mike O’Rourke, chief technical strategist at JonesTrading, expressed concern about the situations of Apple and Tesla in China. “Leaders Apple and Tesla continue to be bombarded daily with negative headlines about their core businesses. While it hardly attracts attention, it doesn’t help that they are also the two companies most affected by China,” MarketWatch quoted.
Meanwhile, Jenny Hardy, portfolio manager at the GP Bullhound Global Technology Fund, told MarketWatch that for Apple and Tesla, “it’s more about the competitive environment that could hurt them than about their underlying markets.” Hardy also points to some new market launches in China that competed with Tesla in the upper price segment, such as Huawei’s new luxury model Aito M9. “At least for Tesla, this means that the aggressive price war in China will continue,” predicts the expert. And Huawei also represents serious competition for Apple.
Peter Navarro predicts the “destruction of Apple and Tesla in China”
Also included is Peter Navarro, former White House trade adviser Donald Trump, was recently highly critical in his op-ed titled “The Eve of Apple and Tesla’s Destruction in China – American CEOs Rarely Outsmart Beijing”: “Under mercantilist government policy – everything is contained in state documents for any CEO to read – China is using its honeypot of cheap labor, lax environmental regulations and massive land, energy and other government subsidies to attract foreign capital and companies. China’s quid pro quo, in complete violation of WTO rules, is the forced transfer of an American’s technology company to emerging Chinese competitors in exchange for access to Chinese markets. And further: “Like GE before them, Apple and Tesla now face this grim mercantilist reality. Since Mr. Cook and Mr. Musk have each ordered the majority of Apple and Tesla’s production to be moved to China, the companies are at the mercy of a merciless dictator in Xi Jinping.” , MarketWatch quotes.
Navarro therefore advises investors to think more deeply about investing in US corporations: “[…], you have to ask yourself whether Apple or Tesla are still safe investments – at least on the long side, if you understand.” Addressing the threat of competition from Huawei, Navarro said: “In fact, China’s national champion Huawei is crushing Apple. To support Huawei’s frontal and flank attack, China has banned its government officials from using iPhones.” For Tesla, BYD also represents a serious threat: “Tesla is facing its own final destruction with the sudden emergence of BYD. This is a formidable Chinese national champion, weaned from China’s massive subsidies and its blatant theft of Tesla technologies and styles. BYD recently stunned the world by overtaking Tesla to the top of electric vehicle production not only in China but globally.”
According to various experts, investors should keep an eye on the shares of Apple and Tesla and especially the situation in China and react if necessary.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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