To a certain extent, financial media these days is "all Apple (Nasdaq:AAPL), all the time." When you consider the significance and impact of Apple's performance and health on the entire market ecosystem, that level of attention doesn't seem quite so outlandish. For better or worse, the health of Apple shapes the fortunes of a large number of stocks and to some extent, the markets themselves.

The Chip, Phone and Carrier Ecosystem
As Apple makes virtually nothing on its own, a large number of chip and component suppliers rely on Apple for varying percentages of revenue and stock market capitalization.

Broadcom (Nasdaq:BRCM) is a company with over $7 billion in annual revenue, but 13% of that goes to Apple. Likewise, the even larger Qualcomm (Nasdaq:QCOM) also gets a meaningful percentage of revenue from this one company, as is the case for a large number of chip companies, such as Skyworks (Nasdaq:SWKS), Triquint (Nasdaq:TQNT) and OmniVision (Nasdaq:OVTI). In fact, estimates suggest that Apple buys close to 10% of all chips manufactured on the planet.

Looking at it another way, those chip companies with sizable exposure to Apple have been among those stocks that have done relatively better at a time when chip stocks in general have been struggling through weak end markets in PCs, consumer electronics, industrial and communications hardware.

The opposite has also proven true, as losing Apple's business has driven down more than a couple of stocks. Audience (Nasdaq:ADNC) plunged nearly two-thirds when management told investors that the iPhone 5 was not going to use its technology. The stock of OmniVision has likewise gone on a roller coaster, as investors wavered between optimism and fear that the company's imaging sensors would be included in the next iteration of the iPhone. Even Linear Technology (Nasdaq:LLTC), a large and very diverse analog chip company, saw its stock batted around when management opted to preserve margins and let Apple's business go.

Apple also has significant influence on other phone and network operators. Following closely in Apple's footsteps (and, according to a recent patent ruling, a little too closely) has propelled Samsung into smartphone royalty, while Apple's success has sent the fortunes of Nokia (NYSE:NOK) and Research In Motion (Nasdaq:RIMM) into a tailspin.

Market Cap Means Market Influence
Apple's size also lends it major significance in the stock market. Within the much-followed Nasdaq composite, Apple appears to have a weighting of over 12% (Nasdaq does not openly publish its weightings, but the Fidelity Nasdaq Composite Tracking Index ETF (Nasdaq:ONEQ) gives it a 12.5% weighting). Within the Nasdaq 100 and the very popular PowerShares QQQ (Nasdaq:QQQ) ETF, the weighting is a whopping 19%. It goes further than this, though. If you include those chip and tech companies with meaningful revenue exposure to Apple, the weighting influence in the QQQ goes up to roughly 25%.

Along similar lines, Apple has morphed into a sort of bellwether for technology and consumer devices. With almost 10% of the semiconductor's output going to Apple and over $440 billion of institutional investment dollars committed to the stock (not to mention options, short positions and so on), it stands to reason that it should be. After all, it looks as though roughly 1% of global institutional assets under management are in Apple's stock

Setting the Tone and Framing the Argument
Alongside Apple's significant status as a chip customer goes its strong influence as a trendsetter and business mover in a variety of markets. Apple has significantly changed the wireless business. Having exclusivity on Apple's iPhone was a big deal back in the day, and there have been plenty of stories speculating that Verizon (NYSE:VZ) and AT&T (NYSE:T) are trying to regain control of the market. Along similar lines, the idea of a chain of Nokia or Samsung retail stores would have seemed ridiculous 10 years ago, but Apple's retail stores have taken traffic, control and profits away from Verizon as well as electronics retailers, such as Best Buy (NYSE:BBY), that once looked at wireless phones as a lucrative profit source.

Apple, likewise, forces its rivals to play along with rules it gets to write. Again, looking back to the patent fights between Apple and Samsung, it looks as though following (or copying, depending upon your perspective) Apple is about the only way to reliably succeed in smartphones. Apple's success seems to have goaded rivals such as Hewlett-Packard (NYSE:HPQ) into wasting considerable resources in developing competing products.

The Bottom Line
Whether an investor looks at the revenue, the market cap or its market share in markets such as smartphones and tablets, Apple wields significant influence. History suggests that this won't last, but for now, Apple affects a long chain of suppliers, rivals and related players. With that sort of industry and market position, it's fair to say that what's good for Apple is good for the market, at this point in time.

At the time of writing, Stephen D. Simpson did not own shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    What Will HP's Split Do to Its Stock?

    Read about Hewlett-Packard Enterprises, a new spinoff company from Hewlett-Packard. Understand how the two companies will focus on different markets.
  2. Investing Basics

    Learn How to Trade Semiconductor Stocks in 4 Steps

    The enormously diverse semiconductor industry requires market players looking for exposure have specialized knowledge.
  3. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  4. Professionals

    Why Near-Retirees Shouldn't Sweat the Volatility

    With the stock market bumpy, some folks nearing retirement might be nervous. Here's how to create some wiggle room for your portfolio.
  5. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  6. Investing News

    Why the Philippines Is the #1 Source for Tech Startups & Talent

    In the last few years, the Philippines has been working diligently to re-invent itself, and that work has paid off. The Southeast Asian nation is rapidly gaining notoriety as a leading source ...
  7. Investing News

    Austin Set to Rival Silicon Valley

    Over the years, Austin, Texas has lovingly embraced its quirky reputation with the slogan “Keep Austin Weird.” Today, the capital city is attracting several tech startups and investors, making ...
  8. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  9. Professionals

    Fund and ETF Strategies for Volatile Markets

    Looking for short-term fixes in reaction to market volatility? Here are a few strategies — and their downsides.
  10. Stock Analysis

    The Biggest Risks of Investing in Amazon Stock

    Find out which risks are most important to Amazon's shareholders. Learn which operational risks impact share prices and which financial risks affect investors.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!