Saudi Aramco overtook Apple Inc. as the world’s most valuable company, stoked by a surge in oil prices that is buoying the crude producer while adding to an inflation surge throttling demand for technology stocks.
The Saudi Arabian Oil Company Aramco traded near its highest level on record on Wednesday, with a market capitalization of about $2.43 trillion, surpassing that of Apple for the first time since 2020. The iPhone maker fell 5.2% to close at $146.50 per share, giving it a valuation of $2.37 trillion.
Soaring oil prices, while great for profits at Aramco, are exacerbating rising inflation that is forcing the Federal Reserve to raise interest rates at the fastest pace in decades. The higher rates go, the more investors discount the value of future revenue flows from tech companies and push down their stock prices.
Chief Investment Officer at Tower Bridge Advisors, James Meyer, said, “You can’t compare Apple to Saudi Aramco in terms of their businesses or fundamentals, but the outlook for the commodity space has improved. They’re the beneficiaries of inflation and tight supply.”
Earlier this year, Apple boasted a market value of $3 trillion, about $1 trillion more than Aramco’s. Since then, however, Apple has fallen nearly 20% while Aramco is up 28%.
Apple representatives didn’t respond to a request for comment.
According to Tim Ghriskey, the Senior Portfolio Strategist At Ingalls & Snyder, With the Fed on pace to further raise rates by at least another 150 basis points this year and with no prospects yet of a resolution for the conflict in Ukraine, it may be a while until tech regains dominance.
He further added, “There’s panic selling in a lot of tech and other high-multiple names, and the money coming out of there seems headed in particular for energy, which for now has a favourable outlook, given commodity prices. Companies like Aramco are benefitting significantly from this environment.”
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