By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
Panelists generally agree that Apple's high valuation (28x forward P/E) and regulatory risks (EU DMA rules, China exposure) make it a questionable 'smartest' correction buy, despite its strong brand loyalty and services growth. The key debate lies in the extent to which regulatory changes could impact Apple's services revenue and ecosystem integrity.
Risk: Degradation of the high-margin services flywheel due to regulatory changes and potential loss of the 'walled garden' integrity.
Opportunity: Apple's enduring brand moat and cash-rich balance sheet providing resilience during market downturns.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
This technology company offers investors a track record of performance and potential for more growth down the road.
The company has a solid moat, or competitive advantage, that should support revenue gains.
When the market is climbing, it's easy to get excited about investing -- you might buy popular stocks of the moment and benefit from their momentum or look for undiscovered treasures that could be the next to soar. But when indexes slip, investors sometimes hesitate to invest, worrying that, after they buy a stock, it will decline further.
But these times actually offer investors the best investing opportunities. This is because you can get in on high-quality stocks at reasonable prices, and these players may deliver strong returns over the long run. Technology stocks are the perfect example of what to buy during such moments. Since they thrive in growth environments, even the strongest names often falter during periods of market uncertainty.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Though the market isn't in a correction now, these events happen, so it's a wise idea to prepare for them. This means planning which stocks might make interesting buys the next time such a movement takes place. Let's check out the smartest tech stock to buy during every market correction. It's not what you'd expect.
First, let's answer a key question. What is a market correction? This is a decline of 10% to 20% in a major index, and it could happen as a result of an external event or simply after a magnificent streak of gains. Corrections may seem unsettling, but they offer investors something very positive: many buying opportunities, particularly in the world of growth stocks.
With such a selection of growth stocks to buy, though, which one should you consider buying during every market correction? You might think of the hottest tech stocks that generally trade at high valuations -- after all, during a correction, they surely will offer you a better entry point.
But the smartest tech stock to buy at such a moment actually is a company that's maintained a steadier valuation in recent years, has demonstrated its ability to recover after every market downturn, and has a fantastic moat or competitive advantage. I'm talking about Apple (NASDAQ: AAPL), maker of the world's best-selling smartphone and other leading devices.
The chart below shows that Apple has greatly outperformed the Nasdaq Composite over the past decade.
And this brings me to the subject of Apple's moat, which has led to a long track record of earnings growth.
Apple's moat involves the strength of its brand. The company has maintained a customer retention rate of about 90% as users return for the latest update of the iPhone -- and today this is leading to an entirely new revenue opportunity, the sales of services. So, now that Apple has a massive user base -- and one that sticks around -- the company can count on selling these customers everything from digital entertainment to storage. This means Apple benefits when it sells the device and on an ongoing basis, as the customer pays for services. Apple has reported record services revenue in recent quarters, and it's very likely that this will continue.
It's also important to note that, during a market downturn, customers wouldn't necessarily abandon their Apple devices or switch to another brand -- instead, they might delay an upgrade. So while Apple's revenue could slip during a tough economic phase, this situation is likely to be temporary -- and an improving economy could actually spur a significant gain as individuals who delayed buying a new phone rush to make the move. Apple's earnings and stock performance, shown above, support this idea.
Meanwhile, at times when the Nasdaq has declined, Apple has offered investors opportunities to get in on the stock at bargain prices, as you can see in the following chart.
And even during times of market growth, Apple's valuation hasn't reached ridiculously high levels. Instead, it's fluctuated within a reasonable range -- this is positive because it leaves the stock room to run.
All of this means Apple is a fantastic stock to buy during every market correction and one to hold onto as the market recovers and goes on to climb.
Before you buy stock in Apple, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $483,476! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,362,941!
Now, it’s worth noting Stock Advisor’s total average return is 998% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
**Stock Advisor returns as of May 20, 2026. *
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Apple's moat is real but insufficient to guarantee outperformance in the next correction given hardware saturation and geopolitical risks."
The Motley Fool piece frames Apple as the reliable correction buy due to brand loyalty, 90% retention, and services tailwinds that cushion hardware cycles. Yet it underplays how iPhone revenue stagnation, China exposure, and rising regulatory scrutiny could turn a 10-20% Nasdaq dip into prolonged AAPL underperformance. The article also notes its own Stock Advisor service currently favors ten other names over AAPL, revealing internal skepticism. Investors should weigh whether steady valuation multiples truly protect against a services slowdown once upgrade cycles lengthen further.
Apple's installed base and recurring services revenue could still deliver faster rebound than most growth stocks once macro stabilizes, making the moat argument hold even if hardware growth stays flat.
"Apple's premium valuation leaves little room for the 'bargain' entry the article promises during a 10-20% correction."
This is a clickbait headline masking a vanilla Apple recommendation. The article claims Apple is 'not what you'd expect' for correction buying, then argues it's the safest mega-cap with a 90% retention rate and services tailwinds. That's exactly what everyone expects. The real issue: Apple trades at ~28x forward P/E (vs. Nasdaq ~20x), meaning it's priced for perfection. During corrections, quality doesn't always hold—it reprices. The article cherry-picks a decade of outperformance without mentioning Apple's 2022 drawdown matched the Nasdaq. Services growth is real but already baked into valuation. The piece also contradicts itself: it warns against 'hottest tech stocks at high valuations' then recommends the most expensive mega-cap.
Apple's 90% retention and $22B+ annual services revenue (recurring, high-margin) genuinely do provide downside protection in recessions—delayed upgrades hurt less than category abandonment. If services compound at 15%+ while devices stabilize, the valuation could compress yet fundamentals improve.
"Apple's current valuation premium is unjustified given its transition from a high-growth innovator to a mature, slow-growth services provider."
Labeling Apple (AAPL) as the 'smartest' correction buy is a classic defensive play that ignores the company's current growth stagnation. While the 90% retention rate and services revenue growth are impressive, they mask a lack of hardware innovation and significant regulatory headwinds in the EU and US. Apple currently trades at a forward P/E of roughly 28x, which is historically rich for a company with low single-digit revenue growth. Investors are paying a premium for a 'safe haven' that is increasingly exposed to geopolitical risks in China and a saturated smartphone market. Buying during a correction only makes sense if the valuation compresses below 20x forward earnings.
Apple's massive cash pile and aggressive share buyback program provide a floor that few other tech companies can replicate, making it an essential volatility hedge.
"Apple remains a durable, defensive core in corrections, but upside hinges on continued services growth and a healthy iPhone upgrade cycle at reasonable valuations."
Apple’s enduring brand moat and cash-rich balance sheet make it a practical ballast in corrections, but the article’s 'always the smartest pick' framing reads like marketing. A true downturn tests iPhone upgrade cycles, services growth momentum, and regulatory exposure (App Store economics, China risks). Even with strong demand, higher discount rates can compress valuations, so outsized upside in a correction is not guaranteed. The piece also glosses over alternative moats that could outperform in AI cycles (MSFT, GOOG, NVDA) and ignores that Apple’s performance often hinges on the timing of consumer demand, which can wobble in a recession. Use AAPL for resilience, not a certainty.
Strong pushback: in a deep downturn, even a moat megacap can fall with the market; Apple’s relative resilience may still trail AI-driven growth names if risk appetite collapses and rates stay high.
"EU DMA rules threaten to compress Apple's services margins beyond what valuation discussions account for."
Claude correctly flags the 28x forward P/E but misses how EU DMA rules could erode the App Store's 30% take rate, directly pressuring the $22B services line both he and Grok reference. If margins compress 200-300bps from regulatory changes, even 90% retention won't shield EPS as much as assumed during a prolonged correction. This regulatory overhang links hardware stagnation to services vulnerability in ways the article ignores.
"EU DMA margin pressure is material but localized; China geopolitical risk poses faster downside than regulatory erosion."
Grok's DMA margin compression math is solid, but underestimates Apple's pricing power. Services aren't fungible—iCloud, Apple Music, AppleCare command premiums even under regulatory pressure. The real risk: if App Store take-rate drops 30%→15%, Apple loses ~$3.3B annually, but that's ~5% of services revenue, not existential. The bigger threat is China revenue (20% of total) facing geopolitical headwinds faster than EU rules bite. Regulatory overhang is real but priced in less than macro recession risk.
"Regulatory erosion of the App Store payment monopoly threatens the structural integrity of Apple's high-margin services flywheel, not just isolated revenue lines."
Claude, your $3.3B revenue impact estimate is dangerously optimistic. You’re ignoring the 'second-order effect': if Apple loses the ability to force proprietary payment rails, the ecosystem's 'walled garden' integrity fractures. Developers will move to direct billing, eroding Apple’s 30% commission and, more importantly, its ability to cross-sell services. The risk isn't just a 15% rate cut; it’s the total degradation of the high-margin services flywheel that justifies the 28x multiple. China is a headline risk, but regulatory fragmentation is an existential margin killer.
"Nonlinear risk: a 30% App Store take-rate cut could erode the ecosystem and services flywheel enough to hit margins beyond the 200–300bp assumed by Grok, undermining the defensive thesis."
Grok's DMA margin compression assumes a straightforward 200–300bp squeeze to operating margins. The real risk is nonlinear: a 30% take-rate cut could erode the ecosystem's cross-sell flywheel, spur developer churn, and depress services growth beyond the 5% headwind you estimate. If App Store economics deteriorate, the 'defensive' thesis collapses faster than multiple expansion would imply, especially with China/regulatory risk intact.
Panelists generally agree that Apple's high valuation (28x forward P/E) and regulatory risks (EU DMA rules, China exposure) make it a questionable 'smartest' correction buy, despite its strong brand loyalty and services growth. The key debate lies in the extent to which regulatory changes could impact Apple's services revenue and ecosystem integrity.
Apple's enduring brand moat and cash-rich balance sheet providing resilience during market downturns.
Degradation of the high-margin services flywheel due to regulatory changes and potential loss of the 'walled garden' integrity.