Will antitrust probes take a bite out of the Apple share price?

The Apple share price [AAPL] has blossomed during 2021 with gains of 14.7% in the year to close 15 July at $148.48. An early surge saw the Apple share price make gains of 7.9% by 26 January, but this high precipitated the Apple share price falling to earth and bottoming at $116.36 on 8 March, 12.3% below its opening point for the year.

However, the Apple share price rallied through April, closing 3 May at $132.54. At this point, the Apple share price was still 0.1% down for the year. It fell even further to $122.77 on 12 May, but this marked the beginning of a prolonged period of accelerating gains for the iPhone manufacturer.

The run is still ongoing and sees the Apple share price 53.8% above its level 12 months ago.

  

Private matters

Apple has seen off a coordinated attempt by Chinese tech companies to circumvent its strict privacy rules.

Baidu [9888], Tencent [0700] and ByteDance (owner of TikTok) were among a group of tech companies that worked with two Beijing-affiliated groups to build a means of tracking iPhone users’ behaviour even if they rejected Apple’s official advertising identifier, IDFA. The Chinese Advertising Association’s solution, CAID, was completed last year and tested ahead of release in late March.

Apple appears to have seen off the threat to its users’ security by blocking updates to early adopters of CAID in its App Store. The intervention appears to have doused appetite for CAID, with the project losing support and momentum following Apple’s decision.

Apple had been put in an awkward position by CAID, which could have forced it to choose between exempting China from its strict privacy rules, or angering the Chinese establishment.

“The Chinese app ecosystem was collectively baiting the bull with CAID,” said Alex Bauer, head of product marketing at mobile measurement platform Branch. The Chinese stance was “that Apple couldn’t afford to ban every major app in the market”.

Instead, Apple’s early intervention seems to have headed off the threat. “Apple called their bluff, and seems to have reasserted control over the situation,” said Bauer.

“Apple called their bluff, and seems to have reasserted control over the situation” - Alex Bauer

 

News of Apple’s apparent victory sent the Apple share price up by 1.5% when it broke on 5 July.

Apple stated that “App Store terms and guidelines apply equally to all developers around the world.” Rich Bishop, chief executive of AppInChina, described the result as “a clear victory for Apple, and also consumer privacy”.

However, the threat to Apple’s privacy credentials may not be over yet. European and German antitrust probes into Apple are currently examining the accusation that Apple’s practices such as preventing third-party tracking are anti-competitive. However, EU digital competition chief Margrethe Vestager has indicated that she approves of Apple’s privacy updates given that “it’s the same condition for everyone”.

The German probe’s announcement had little impact on the Apple share price, however; it closed 1.4% higher on 21 June when the probe was announced than on the previous day.

 

Big tech’s strong run

Big US tech companies are generally enjoying a strong run at present, with the Invesco QQQ Trust [QQQ], which tracks the tech-dominated Nasdaq index, having gained 15.9% in the year to 15 July and just short of 39% over the past 12 months.

The fund is sensitive to changes in the Apple share price. As the world’s largest company by market capitalisation, it is no surprise that Apple tops the fund’s holdings with a weighting of 11.70% (as of 14 July).

  

Apple is an even larger component of the iShares US Technology ETF [IYW]. Still the top holding, Apple accounts for 18.97% of the fund’s weight as of 14 July. The fund has outperformed the Invesco QQQ Trust in the year to date, with gains of 19.8%, and over the trailing 12 months, with gains of 45.6%.

In the long term, this could be due to the over-performance of the Apple share price, which has gained more than the Nasdaq over the past 12 months. However, in the year to date, Invesco QQQ Trust has outperformed Apple, so it is more likely that the iShares US Technology ETF’s relative over-performance this year is driven by the 27% surge in the share price of its second-largest holding, Microsoft [MSFT]. As of 14 July, ETF had a 17.25% weighting in Microsoft.