Apple Emerges as Investors' Safety Trade Amid AI Doubts and Tech Sell-Off

Amid questions about the durability of the artificial intelligence complex and fears of a global rate sell-off, Apple is suddenly investors' safety trade of choice.

Shares rose 2.6% Tuesday amid a broader tech rout, continuing its outperformance of the broader market.

In fact, Apple stock hasn't been this inversely correlated to its tech peers since 2005, according to a CNBC analysis using ThinkOrSwim data. The 30-day correlation between the second-largest company in the world and the Nasdaq-100 Index of which it commands a 7.5% weighting reached a low of negative 0.86 on Thursday and is currently at -0.82. In the past month, shares of the iPhone maker are up 7% versus a 1% gain for the Nasdaq-100.

Apple has gone through periods of inverse correlation to the Nasdaq throughout moments the past decade, but never to this extent for this long. Fittingly, the only comparable period was in the first quarter of 2024, when the 30-day correlation was nearly as inverted as it is today. At that time, Apple was in the middle of a selloff, as investors shifted money into the leading AI disruptors.

"When the AI trade gets questioned, Apple doesn't sell off with it, because it was never carrying that risk in the first place," said Dave Mazza, chief executive officer at Roundhill Investments, who runs an Apple ETF that uses swaps to generate weekly income. "It has become the hedge inside the Nasdaq."

After lagging the Nasdaq the first six months of the year, Apple is now up 20% compared to the index's 15% return. Over the past three years, the two are close to even, with the Nasdaq up 90% compared to Apple's 82 percent advance.

Options traders seem to think Apple's relative strength is sustainable. Almost 1.5 million calls traded in Tuesday's session, compared to less than 700,000 puts, and 543,000 calls were likely initiated by buyers, compared to under 220,000 put-buyers, according to ThinkOrSwim data.

The net delta exposure to underlying contracts, a measure of sensitivity of an option's value to changes in Apple price, was strongly imbalanced towards bullish positioning, according to flows analysis on Barchart.

Heavy volume underpinned the positioning as well. Apple options were second-most traded Tuesday on volume that was about twice the 30-day average, SpotGamma and Cboe LiveVol data show.