London: Saudi Aramco has overtaken Apple as the world’s most valuable company after higher oil prices pushed shares of the world’s biggest crude exporter to record levels.
It is the first time that Saudi Aramco has regained the top spot since 2020 and follows a broader sell-off in technology stocks since the start of the year.
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.
Even if the move proves short-lived and Apple retakes the top spot again, the role reversal underscores the power of major forces coursing through the global economy.
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.
The sinking share price came despite Apple reporting better-than-expected profits in the first three months of this year amid strong consumer demand.
But, Apple warned that the China Covid-19 lockdown and ongoing supply chain woes would dent June quarter results by $4 to $8 billion.
“Supply constraints caused by Covid-related disruptions and industry-wide silicon shortages are impacting our ability to meet customer demand for our products,” Chief Financial Officer Luca Maestri said on a conference call with analysts.
“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,” said James Meyer, chief investment officer at Tower Bridge Advisors.
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%.
Aramco president and CEO Amin Nasser cautioned that the company’s outlook remained uncertain due in part to “geopolitical factors”.
“We continue to make progress on increasing our crude oil production capacity, executing our gas expansion program and increasing our liquids to chemicals capacity,” Nasser said.
On the results, for 2021, he acknowledged that “economic conditions have improved considerably”.
A strong rebound last year saw demand for oil increase and prices recover from their 2020 lows.
Inflation could cause a drop in consumption, reducing demand for oil, while tech shares could continue to be dragged down by investor concerns over company costs, interest rate rises and supply chain woes.