Wedgewood Partners, an investment management company, stated in its third-quarter 2026 investor letter that the market underestimates Apple Inc.'s long-term ability to differentiate its artificial intelligence ecosystem through deep software and hardware integration. The firm noted that hardware systems and silicon remain the most important elements of any AI strategy, a view it has maintained over the past three years.
In the letter, Wedgewood Partners reported that Apple contributed significantly to the quarter's performance for the Wedgewood Composite. The portfolio delivered a net return of 2.5% in the quarter, outperforming the Standard & Poor's 500 Index at 2.3% and the Russell 1000 Growth Index at 0.9%, though trailing the Russell 1000 Value Index at 2.6%. The firm attributed broader market pressure to surging Treasury yields and macro headwinds, which negatively impacted rate-sensitive stocks and market breadth. Despite these challenges, resilience in AI stocks and mega-cap technology companies pushed the NASDAQ 100 to record highs.
Wedgewood Partners detailed Apple's financial results, noting that the company grew revenue by 16% while navigating input pricing pressures effectively. This resulted in stronger gross margin dollar growth. After adjusting for tariff charges and refunds, Apple grew earnings per share in the high teens. The company invested heavily in its silicon and hardware ecosystem, spending over $40 billion on research and development over the trailing 12 months. Wedgewood Partners compared this figure to the collective hardware research and development spending of major chip developers, including Nvidia, Broadcom, Marvell, ARM, and AMD, which amounted to approximately the same total during the past 12 months.
Market data cited in the letter shows Apple Inc. closed at $343.46 on October 16, 2026, with a market capitalization of $5.01 trillion. The stock is up 26.34% year-to-date and trades within a 52-week range of $243.42 to $348.15. Wedgewood Partners is actively deploying capital into new positions, recently adding Toll Brothers, Hermès, and TJX Companies.
According to Insider Monkey data referenced in the publication, Apple Inc. ranks 10th on a list of 40 most popular stocks among hedge funds heading into 2026. A total of 169 hedge fund portfolios held Apple shares at the end of the second quarter, compared to 170 in the previous quarter. While acknowledging Apple's investment potential, the source noted that certain other AI stocks offer greater upside potential with less downside risk.