Apple shares hit their highest level since December on Tuesday, as investor sentiment around the iPhone maker continues to improve.

Shares rose 7.3% by the close to reach US$207.15. The stock has risen more than 20% off an April low, a rally that has added more than $500-billion to its market capitalisation and returned it above a $3-trillion market cap.

The record came in the wake of the company’s annual Worldwide Developers Conference, where it showcased a number of features related to artificial intelligence and announced a partnership with ChatGPT maker OpenAI. The event crystallised a strategy many investors felt had been missing from Apple amid AI-fuelled rallies elsewhere within Big Tech.

Apple’s AI event fuelled hopes that customers will pay up for the next generation of iPhones, and DA Davidson upgraded the stock to buy from neutral on this thesis.

The AI functions “could lead to a much-needed iPhone upgrade cycle”, wrote analyst Gil Luria. “Apple has not only the consumer’s information, but also their trust, it can deliver the above deeply integrated functionality in a way that standalone chat applications, PCs and Android devices may not be able to fully replicate.”

Such a cycle would represent the kind of growth catalyst investors have been longing for.

Concerns about the company’s growth were eased by a positive quarterly report in early May, when Apple also announced the largest stock buyback programme in US history at $110-billion.

Lagging

That report has also supported the stock in recent weeks — May was the best month for Apple shares since July 2022 — but despite the record share price, Apple is only up 3.7% this year. It lags behind the Nasdaq 100 Index’s 13% gain, while stocks with more concrete AI exposure — including Microsoft, Amazon.com, Alphabet and Meta Platforms — have all posted double-digit gains. AI-focused chip maker Nvidia has soared 146%, overtaking Apple in size.