Apple Raises Device Prices as iPhone Growth Hits 22%
Apple's 22% iPhone sales growth allowed it to pass on rising DRAM costs to consumers, highlighting the pricing power driving the tech giant to a $4.89 trillion market capitalization.
Apple generated 17% revenue growth in the second quarter, driven by a 22% surge in iPhone sales and a 16% increase in services. The tech giant closed at $333.26 on July 16, pushing its market capitalization to $4.89 trillion. The stock has gained 57.81% over the past 52 weeks, reflecting sustained demand ahead of new product releases.
The company is carefully managing this hardware upgrade cycle against a backdrop of rising component inflation. "Because input prices for DRAM have risen at a parabolic rate, the Company recently raised prices on some of its devices to pass these costs through," Wedgewood Partners noted in its second-quarter investor letter.
"As one of the largest single purchasers of DRAM, the Company has strong negotiating leverage, but it can also implement hardware and software innovations to reduce its dependence on memory." This dynamic highlights how dominant hardware vendors can protect profitability even when semiconductor supply chains experience severe pricing pressure.
Rather than absorbing these supply chain shocks, Apple is successfully shifting the burden to consumers. The iPhone 17 family has already catalyzed a solid upgrade cycle for the company. Wedgewood expects another strong product launch later this year that will feature a new foldable form factor.
Apple served as a top performance contributor for Wedgewood during the quarter, alongside Taiwan Semiconductor Manufacturing, Alphabet, United Rentals, and Visa. However, the Wedgewood Composite delivered a net return of just 9.4% in the second quarter. This significantly lagged the 15.2% return of the S&P 500 Index and the 16.7% gain of the Russell 1000 Growth Index.
The firm's preference for high-quality stocks has hurt its recent relative performance in a momentum-driven market. Over the past 15 months, Wedgewood's portfolio returned 25%. This sharply trailed the 90% gain posted by the S&P 500 Momentum ETF during the same period.
Looking ahead, Wedgewood is increasing its investments in hyperscalers and semiconductor hardware to capture enterprise AI adoption. The firm cited substantial earnings potential for these infrastructure providers. Nevertheless, it cautioned investors about inherent cyclical risks and volatility in the semiconductor sector.
