Joel Kulina, Head of Tech/Media Trading at Wedbush, says Apple is under pressure due to tariffs and weak innovation. He favors cybersecurity and video games like GTA 6 as safer tech plays.

New York

Apple has recently experienced a significant decline in its stock, marking its worst performance over a three-day stretch since 2001. This downturn is attributed to challenges such as tariffs and slowed innovation, especially in their product line. Hedge fund communities have been shorting Apple's stock for some time due to these issues, while longer-term investors remain underweight. Despite Apple's services part of the business maintaining some market interest, the company has struggled with new product traction, particularly in AI. This sentiment is reflected in the broader tech market, where Apple is seen as having considerable challenges compared to other large-cap tech companies.

Additionally, the market saw a historic trading day with the SPY ETF recording its busiest day ever, showcasing considerable investor interest in mega-cap tech stocks. Despite the general market volatility, driven mainly by uncertainty and the impact of tariffs, there may be a short-term floor in tech investments due to heavy use of ETFs by macro firms for hedging.

In contrast to the uncertainty surrounding Apple and similar tech stocks, cybersecurity and video games are seen as safer investment bets. The ongoing concerns of a possible recession have not dampened the need for cybersecurity, which remains a priority for CIOs even with broader spending revisions. Cybersecurity companies like CyberArk and Rubrik have demonstrated strong performance and continue to be favored due to their innovation and less exposure to tariff-related challenges.

Video games, particularly the anticipated release of Grand Theft Auto 6, represent another area of investor interest. The gaming industry is notable for its robust performance and potential for significant returns, with Take-Two being highlighted as a promising investment due to its connection with Grand Theft Auto, one of the most anticipated games in years.



Why cybersecurity is one area people just can't afford to cut

So just going back to Apple really quick, Apple actually having its worst three-day stretch since all the way back in 2001. What is your take on Apple, the declines, and do you think that maybe we've seen a bottom when it comes to Apple? It seems to be bouncing with the rest of the market. Also, maybe some hope on news of moving more production to India? Yeah, I mean, I'd say Apple. I mean, typically within the mega cap complex, sentiment here has been probably the most negative amongst them all for years now. Stock was down 15% off its highs even before kind of Trump's tariff announcement last week. So Apple's been a funding short for the hedge fund community what feels like forever. Long only community has been perpetually underweight, the stock, and I think for right reasons, mostly due to slowing innovation, especially around the product side of things. We know the services part of the business has really kind of been the big dryer of the multiple in the story over the past five to 10 years. And then kind of just, again, there's just really, they've been AI, AI intelligence, Apple intelligence has just been a dud that kind of unveiled details last year, last June, never just have gained any traction with that product as well. So there's just been continued frustration both from the hedge fund community and long only community. And there's just been, you know, reality is just more attractive stories within big cap tech. All right, fair enough. One thing I want to bounce off of you yesterday, I'm getting this from State Street. The SPY ETF saw $127 billion traded, busiest day in its entire history. Obviously there's a great concentration of mega cap tech when it comes to that ETF. If we continue to see investors investing in those ETFs and things like the triple Qs, whether you want to call it buy on the dip or whatever else, isn't that going to create a natural floor when we're looking at tech? I mean, potentially. I mean, I think there's been a lot of, you know, crossing currents that have been ongoing the past, you know, three to four days. And obviously when the market falls 2% in two days, it's sort of unprecedented, right? We've seen these types of pullbacks over much longer periods of time. And I think the heavy uses of ETFs is probably going to remain here for at least a near term as uncertainty remains high. So yeah, maybe we get some sort of floor, but I know, yeah, macro firms especially have been heavily, heavily using ETFs to kind of, you know, better hedge your books and kind of take, not really take backs, really just kind of protect performance in the overall. So maybe pretend, you know, there's some sort of near term bottom, but again, in like Apple, I think there's just a lot of hair on it. And then until these China's tariff situation kind of removes to the background, I think there's just better stories with a lot less hair on the ETF. Clearly a lot of uncertainty. Let's get to some areas of the market that you're actually more certain on, Joel. You like cybersecurity, you also like video games. We might be facing a recession, a lot of fears about that. So are you saying that cybersecurity won't be as impacted by an economic slowdown? Yeah, I think, you know, just looking at all the CIO surveys that the sell side has been putting out there over the past several months, you know, you're seeing, you know, spending revisions, you know, are heading lower, but the one standout remains cyber. And that's one area that people just can't afford to cut. And so with an R coverage universe here, I see CyberArk, one of the cleanest stories in the space, named like Rubrik that had very good earnings just three weeks ago, yet has gotten massively caught up in the unwind out of tech. And these are names that are gonna benefit from continued product innovations and shift the gen AI workloads are just gonna again, drive product momentum. And especially Rubrik, they're showing a lot of good momentum with some of their larger customers as well. So I think these are kind of, you know, secular growth stories, and then just a lot less exposed to a lot of the tariff noise out there. And I think investors, you know, touching on video games as well, are just looking for names that are just a little bit more simplistic, keep it simple, don't, you know, try to don't be a hero in this tape, cause it's gonna be ugly in the sense that we're gonna see a lot of volatility in the coming weeks. So, you know, I love take two. Just to clarify, you like take two, it's just simply on Grand Theft Auto, you think Grand Theft Auto is like a blockbuster essentially? Yeah, I mean, it's gonna be the biggest game that comes out in at least the past decade. I think Grand Theft Auto 5 was launched in 2013. We know the anticipation for the gaming community is just massive. And again, it's just a simplistic, it's a nice catalyst, fundamental driven story. And unfortunately in tech, there's not too many of those right now. And it's had a decent pullback off its highs, but it's been a relative outperformer. And I think you wanna stick with the names that haven't gotten, you know, all the 20, 30% of highs.

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