Skepticism Surrounds Apple's Ambitious $500 Billion Investment Plan

Apple Inc. (AAPL) has announced a significant investment plan of $500 billion for development in the U.S., but the proposal is facing skepticism from notable analysts.

The UBS analyst David Vogt has shared his concerns in a recent note to investors. He emphasized that only 10% of Apple’s supply chain is located in the U.S., with most operations based in countries like Taiwan and China. This raises questions about the practicality of such an extensive investment plan.

Vogt noted that achieving this 10% U.S.-based supply chain took Apple nearly a decade, which adds to his doubts regarding the current plan. He stated, "While the headline figure on the surface is a large number, we believe it lacks substance at this juncture based on history."

Additionally, he highlighted potential financial challenges that come with the investment. Hiring an estimated 20,000 new employees could add about $5 billion to Apple’s operating expenses each year. Vogt also mentioned that Apple's current spending on data centers is around $10 billion annually, which generates roughly $100 billion in free cash flow—of which $90 billion is allocated for share buybacks.

Given these figures, Vogt is doubtful about how the additional funding for the ambitious investment plan will be sourced. He remarked, "It's unclear where the cash flow comes from to try to even remotely attempt this," labeling the $500 billion investment projection over four years as "completely unrealistic mechanically."

Moreover, this isn't the first time Apple has made grand investment announcements. The company previously pledged $350 billion toward the U.S. economy in 2018, followed by a pledge of $430 billion in 2021. Some analysts view these commitments as strategic moves to enhance Apple’s manufacturing capabilities while aligning with U.S. economic policies.

Dan Ives, an analyst from Wedbush Securities, characterized the investment as a way to expand Apple's operational scope. However, other voices in the industry have echoed Vogt's concerns. Short-seller James Chanos labeled Apple's $500 billion investment plan as "unrealistic," especially considering the company's capital base is currently under $160 billion.

On a different note, Gene Munster from Deepwater Management suggests that Apple might increase its annual U.S. investments by $39 billion, representing a 45% rise compared to 2021 figures. Yet, Munster believes that the real incremental investment would be nearer to $20 billion yearly. He also noted that by avoiding tariffs, Apple could potentially save up to $11 billion annually.

Apple, investment, analysis