The Arab oil giant takes the throne

Accordingly, the giant oil company Saudi Aramco on May 11 surpassed Apple to become the most valuable company in the world. Aramco’s market valuation was just under $2.43 trillion as of May 11, according to data from Refinitiv, as the company converted its market capitalization to dollars. Apple has lost more than 5% of its market capitalization during trading in the US, on May 11 the company was valued at $2.37 trillion.

Naturally, prices and energy stocks have risen while investors have sold off shares in several industries, including technology, due to concerns about the deteriorating economic environment. Apple stock has fallen nearly 20% since its peak of $182.94 per share on January 4. Meanwhile, the iPhone maker has also been weighed down by supply chain headaches lately, especially in China, where some of its suppliers’ factories have been temporarily stuck. during the country’s Covid-19 lockdown.

Last month, Apple warned of major losses related to the ongoing situation, saying production and logistics issues could cost its revenue between $4 and $8 billion this quarter. , CEO Tim Cook said in an earnings call.

Dan Ives, managing director of equity research at Wedbush Securities, called the impact of the Zero Covid lockdowns in China likely to remain the “highest concern” for investors in the near term. short time. But concerns could “relieve” in the second half of the year, when the company is expected to launch a new iPhone 14, he added.

In contrast, Aramco is enjoying strong sales and earnings, with profits doubling last year. In its first quarter earnings due May 15, it is expected to report that net income almost doubled to about $38 billion for the January-March period of 2022. Parth Vala, “The Russia-Ukraine conflict has sent global energy prices soaring, resulting in significant revenue and profit growth for energy companies,” said an analyst at GlobalData.

On the one hand, Aramco has exceptionally low production costs, as most of its oil is located in easy-to-reach fields onshore or in shallow water. That boosts profits at the company, which is still 95% owned by the Saudi government.

James Meyer, chief investment officer at Tower Bridge Advisors, pointed out that Apple and Aramco are not comparable in terms of business or fundamentals, although Aramco has clearly benefited from a tightening commodity market. . “They’re the beneficiaries of inflation and tight supply,” Meyer said. The invasion of Ukraine pushed oil prices to a 13-year high of around $130 a barrel. Despite the drop in prices, Brent crude is still trading at $105 a barrel today, up from $77 at the start of the year.

As such, the market capitalization fluctuates frequently: Apple hit the $3 trillion mark, becoming the first company to do so in 2020- becoming the most valuable company on the planet.

Before that time, Aramco also held a certain foothold after the offering share The company’s historic initial public offering in 2019 raised the company’s valuation to $2 trillion.

But the latest market moves show how the outlook for energy and technology producers has recently changed. This shift highlights the impact that Russia’s invasion of Ukraine, soaring inflation, and the current Covid-19 shutdowns in China are all creating economic instability. The move is mostly symbolic, but it shows how markets are changing as the global economy grapples with rising interest rates, inflation and supply chain issues.

Aramco stock is up more than 27% so far in 2022. In March, the oil giant reported that its full-year profit more than doubled as a result of soaring oil prices. As can be seen, Aramco’s rise comes a decade after its inception in 2011, when Apple overtook another energy giant, ExxonMobil, to become the world’s most valuable listed company. Since then, Apple, Microsoft, Google’s owner Alphabet, and Amazon have dominated the stock market and subsequently surpassed a $1 trillion valuation and pushed the oil giants out of the top ranks. . Only Saudi Aramco regularly ranks among the most valuable companies.

There’s “something iconic in the tech industry being overtaken by the oil industry,” said Neil Wilson, of Markets.com, adding: “This wheel of the oil market is pushing. Tech stocks fall rapidly.