Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / Why Apple Is Outperforming NVIDIA in the Tech Selloff
Transcript
- Lucas: Apple stock is up more than six percent in the last five trading days, sitting at $341. The Nasdaq, meanwhile, shed two percent. And NVIDIA — the poster child of AI — dropped eight percent to $192. That spread tells a story about where stock pickers are putting their money in mid-2026. Luna: That's a striking divergence. Apple outperforming the market by that much while other tech giants like Amazon and Meta are also down. What's driving it? Lucas: I think it comes down to the nature of Apple's revenue. Services now account for over a quarter of total sales, and that recurring, high-margin stream is less tied to the capex cycle. Meanwhile, the company just authorized another $110 billion in buybacks. That's a massive capital return that puts a floor under the stock. Luna: So investors are treating Apple almost like a consumer staple — stable cash flows, massive buybacks, low beta. But NVIDIA was the high-flyer. Is this a rotation out of AI hype into quality? Lucas: Partly. Look at Berkshire Hathaway — up 3.8 percent in the same five days. That's a classic value play. But Apple isn't cheap on a price to earnings basis — it's trading around 30 times earnings. The difference is that Apple's earnings growth is supported by real cash flow, not future promises. NVIDIA, on the other hand, is facing questions about AI capex sustainability. Its data-center revenue growth is slowing, and the stock is priced for perfection. Luna: I saw a note from a sell-side analyst saying that NVIDIA's inventory turns are declining for the first time in eight quarters. That's a red flag for a company whose valuation depends on hypergrowth. Lucas: Exactly. And Apple's inventory turns are actually improving. The iPhone replacement cycle is lengthening, but the installed base is enormous — over two billion active devices. Every new user increases the addressable market for services. That's a compound annual growth story, not a year-over-year breakout. Luna: So for a concentrated portfolio, Apple looks like a core holding you can build around, while NVIDIA might be a tactical trade. But that requires conviction that the AI narrative hasn't permanently broken. Lucas: Right. And I think that's the central tension for stock pickers right now. Do you lean into the compounders like Apple, Microsoft, and Alphabet — all of which are up this week — or do you bet that the AI selloff is overdone and buy the dip on NVIDIA? Luna: Microsoft is up 3.6 percent, Alphabet up 5.7 percent. Those are also above market. They have cloud businesses that are monetizing AI, but they aren't as dependent on a single product cycle. Lucas: And they have diversified revenue streams. For a stock picker, that reduces single-event risk. Now, if our money conversations have helped you think about a decision like how to allocate between these names, I want to mention something. Luna: Go ahead. Lucas: We deliberately don't run ads on these episodes. That's a choice we made because we think the topic deserves focus. If you find that valuable and want to support it, there's a simple way: buy me a coffee dot com slash fexingo. Just a way to keep this ad-free and independent. Luna: Yeah, no pressure, but it helps. We're not doing this for the sponsors — we're doing it for listeners who actually care about stock picking. Lucas: Exactly. So back to Apple versus NVIDIA. One concrete way to think about it is to look at return on invested capital. Apple's ROIC has averaged around 30 percent over the last five years. NVIDIA's has been higher, but it's also more volatile. In a concentrated portfolio, consistency matters. Luna: That's a good metric. And it's worth noting that Berkshire Hathaway — with that 3.8 percent gain — is actually Apple's largest shareholder. So Warren Buffett is effectively betting on the same thesis. Lucas: He is. And Buffett has talked about Apple as the best business he knows. That stamp of approval carries weight with value-oriented stock pickers. But the question is: can Apple maintain its outperformance if the broader economy slows? Luna: Its services revenue is somewhat recession-resistant — people don't cancel iCloud or Apple Music in a downturn. But hardware sales could take a hit. Though the recent quarter showed iPhone revenue up slightly, which surprised many. Lucas: Right. And the company has a massive cash pile, over $150 billion. That gives it the ability to continue buying back shares aggressively, which supports earnings per share even if net income dips. That's a structural advantage. Luna: So for someone building a concentrated portfolio of five to ten stocks, Apple looks like a staple. But what about the risk of antitrust action? That's an overhang. Lucas: It is. The Department of Justice lawsuit is still ongoing, and a breakup scenario would shake the thesis. But most analysts think that's years away, and in the meantime the cash generation continues. For a stock picker, it's a known unknown that you can account for with position sizing. Luna: That's a fair point. So let's bring it back to the numbers. Apple is up six percent in a week where the Dow is flat and the Nasdaq is down two. That's a clear signal that the market is rewarding quality. Lucas: It is. And I think the broader lesson for stock pickers in mid-2026 is that compound growth companies with high returns on capital and strong capital allocation are being valued at a premium. That's a shift from the previous years where growth at any cost was the mantra. Luna: So the rotation is real. Value stocks like Berkshire and Apple are leading, while the AI hype cycle corrects. But is that durable, or is it just a short-term flight to safety? Lucas: I think it's more durable than many assume. The macro environment — with interest rates stabilizing around 4.5 percent — favors companies that can generate cash without needing cheap debt. Apple fits that. NVIDIA needs continued capital markets confidence to fund its capex. Luna: Good point. And looking at the Dow up 0.4 percent while the Nasdaq is down 2 percent, that's a two-percentage-point divergence. In a concentrated portfolio, you want to be in the index that's winning. Lucas: Exactly. So my takeaway for stock pickers: if you're building a portfolio today, anchor it with businesses that have proven unit economics and capital return policies. Apple, Microsoft, maybe Berkshire itself. And treat the AI plays like NVIDIA as satellite positions — high conviction, but sized accordingly. Luna: I think that's smart. And the data this week supports it. Apple up six percent, NVIDIA down eight. That's a fourteen-point gap in five days. That's not noise — that's a statement. Lucas: It is. And as we head into August, earnings season will test whether that gap widens or narrows. I'm watching Apple's services margin and NVIDIA's data-center guidance closely. Luna: Good place to leave it. For Fexingo's Stock Picking, I'm Luna. Lucas: And I'm Lucas. We'll be back.