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$3 trillion.

🍎 Apple has become the first U.S. company with a $3 trillion market cap after Friday’s 2.3% gain, continuing a 55% rally in 2023. We have much more below on the monumental feat of a $3 trillion valuation and how Apple pulled this off.

The tech-heavy Nasdaq just posted its best first half in 40 years as we head into the July 4 holiday weekend 🍻

—Matthew & Weronika

Here’s the rundown, with figures YTD:

Today, we’ll discuss the three biggest stories in markets:

• How Apple became a $3 trillion company
• An Indian merger creates a banking giant
• Twitter’s new chief eases into the spotlight

All this, and more, in just 5 minutes to read.

IN THE NEWS

🍎How Apple Became a $3 Trillion Company (WSJ)

It has been one heck of a run for Apple, both in 2023, the past decade, and since its founding in 1976 out of the Jobs family garage. The stock keeps rising, year after year, as it sells more and more iPhones globally.

Less than two months ago, Apple received some of its most resounding praise ever when Warren Buffett said it’s “a better business than any we own.” The stock is up nearly 20% since and up more than 55% this year, becoming the first U.S. company to hit a $3 trillion valuation.

Here are some highlights of how it got there:

• Apple went public in 1980 and then launched its first Macintosh computer in 1984, a key product in bringing computers to the mainstream.
• Steve Jobs returned to Apple in 1997 when the company was teetering on bankruptcy. But four years later, Apple released the iPod. The first rendition could hold 1,000 songs. In 2003, the first version of the iTunes Music Store was released.
• The biggest moment in company history came in 2007 with the launch of the iPhone, a touchscreen-based smartphone that bucked the trend of keyboards. Apple sold 6 million iPhones in the first year, compared with about 225 million in 2022.
• Now, Apple has a healthy “walled garden” of products, including the AirPods, iPad, and a growing services business. Plus, it’s competing with Visa and Mastercard in financial services as it tries to replace wallets with iPhones in the coming years. All told, here’s Apple vs. the S&P 500 over the past five years:

Why it matters:

Friday marked Apple’s fourth consecutive record-high close as heavyweight growth stocks such as Apple, Nvidia, Tesla, and Microsoft have enjoyed rallies in 2023. Some of the optimism is fueled by artificial intelligence, but much of it is driven by bets that the Fed is nearing the end of its campaign of interest rate hikes.

Safe haven: Apple’s most recent quarterly report in May showed revenue and profits fell but still beat expectations. Apple also has emerged as a safe haven for investors thanks to its stock buybacks, healthy financial results, enormous free cash flow, and its reputation as a safe investment during economic uncertainty.

• Apple’s rise comes amid a broader tech boom in 2023. In the first half, Meta and Tesla both more than doubled. Chipmaker Nvidia led the way, riding the A.I. boom to the tune of a 190% rally over the past six months.

🏦 Indian Merger Creates Banking Giant Larger Than Morgan Stanley (Bloomberg)

For the first time, an Indian company has entered the ranks of the world’s most valuable banks.

It’s all thanks to a merger: The combined entity of HDFCBank and Housing Development Finance now trails only JPMorgan Chase, Industrial and Commercial Bank of China, and Bank of America. The merged bank is valued at about $172 billion.

• The upcoming merger of HDFC Bank is set to consolidate a customer base of over 120 million, surpassing the population of Germany.
• The combined entity will expand its branch network to over 8,300 locations and employ a workforce of over 177,000 employees.

HDFC outpaces banks such as HSBC Holdings and Citigroup, propelling itself ahead regarding market capitalization. It surpasses its Indian counterparts, State Bank of India and ICICI Bank, with market capitalizations of about $62 billion and $79 billion, respectively.

• “Worldwide, there are very few banks, which can, at this scale and size, still aspire to double over a period of four years,” an Indian researcher noted.
• The bank expects to grow at 18% to 20%, with strong earnings growth. It has ambitious plans to double its branch network within the next four years.

Why it matters:

After all the turmoil in the baking industry, this mega-merger presents fresh opportunities for both customers and investors.

HDFC Bank’s strong deposit performance positions it ahead of its peers, and the merger presents an opportunity to further expand its deposit base by engaging the mortgage lender’s existing customer base.

• The lender might provide in-house home loan products to its clients. Only 2% of them currently have a mortgage product from HDFC.
• “The lifetime value of a customer’s relationship with that bank just enhances when you start to put a mortgage into his product offering,” the bank’s chief executive said.

🥇 Twitter’s New Chief Eases Into the Spotlight (NYT)

Who wants a high-profile gig at a company whose ad revenue, its major revenue source, is declining by 60%? Linda Yaccarino is in her early days on that job.

She’s Twitter’s new CEO, reporting to Elon Musk, who bought Twitter last year. Thus far, Yaccarino has repaired a relationship between Twitter and Google, spoken with regulators, and focused on employee morale. She’s held happy hours and tried rallying workers with mission statements and greater internal communication.

• “Twitter is on a mission to become the world’s most accurate real-time information source and a global town square for communication,” she wrote this month in her first companywide email. “We’re on the precipice of making history.”
• During an internal ad sales meeting this month, she stated Twitter’s advertising issues, as the company’s U.S. ad revenue has fallen nearly 60%. Musk says he expects revenue this year to be around $3 billion, down from $5.1 billion in 2021.

Yaccarino noted some “big brands” had stayed away from the platform and said she and other sales employees would have to engage in “hand-to-hand combat” to persuade them to return. She also said she would take a different position from Musk’s rocky relationship with the media. Her strategy, she said, is to “have very good relationships with them so they become our advocates or mouthpieces to amplify our strategies.”

Why it matters:

The improving relationship with Google is important after Musk partly stopped paying Google for cloud computing services. Twitter owed Google more than $42 million in unpaid invoices and was trying to stop its use of Google’s products this month. Yaccarino spoke with Google Cloud’s head and then paid the bill.

• Yaccarino was NBCUniversal’s advertising chief, meaning Musk was looking for someone to bolster that part of Twitter. Twitter, which makes most of its money from ads, has struggled to expand that business in recent years. Over the past year, many advertising executives have said it’s one of the most challenging ad markets they’ve experienced.
• Said one ad exec who’s known Yaccarino for a decade: “Linda’s a force. She has one of the biggest jobs in advertising, and the ad market is as hard as it’s ever been.”

Musk and Yaccarino know this is a monumental task, as Twitter’s valuation has fallen from $44 billion (what Musk paid) to what he estimates is $20 billion. Still, they both see plenty of opportunity. Musk has said it could be worth $250 billion one day if it becomes an “everything app” with features like payments. It’d be quite the turnaround for the social media site that’s fighting for eyeballs.

See you next time!

That’s it for today on We Study Markets!

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