It's no secret I have a bit of a soft spot for tech giant Apple (AAPL)... I admit the stock had a tough 2025. It spent most of the year in "neutral" or "bearish" territory in the Power Gauge. And it only rose about 9% for the year, compared with the S&P 500 Index's more than 16% gain.
This Tech Titan Could Use Your Face to Advertise Better
I admit the stock had a tough 2025. It spent most of the year in "neutral" or "bearish" territory in the Power Gauge. And it only rose about 9% for the year, compared with the S&P 500 Index's more than 16% gain.
Today, the stock gets a "neutral+" rating in the Power Gauge.
On Thursday, Apple shared its latest earnings report to much fanfare. The company brought in record-setting levels of revenue. And it beat earnings-per-share expectations as well.
CEO Tim Cook even said that the iPhone had its best quarter ever.
This is great news for Apple. But it still faces strong headwinds going forward.
And sky-high prices for semiconductors – especially random-access memory ("RAM") chips – threaten to erode Apple's margins further.
But the company is eyeing a solution to its existential fears...
You see, Apple recently acquired an AI startup named Q.ai. Apple didn't publicly disclose the purchase price. But some analysts suggest the startup cost Apple around $2 billion to acquire.
Q.ai develops technology for reading facial movements. This tech can supposedly understand "silent communication."
Now, Apple says this will help enhance features in its products. That includes the company's live-translation mode for its AirPods earphones.
But I wouldn't be surprised if Apple has bigger plans for Q.ai's tech. And the company could be looking to fellow Magnificent Seven stock Meta Platforms (META) for inspiration...
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A Facial-Recognition Bet Could Boost Apple's Revenue
As regular readers will recall, back in October, my colleague Ethan Goldman discussed Meta's revenue.
As he noted, the social media titan brought in 98% of quarterly revenue from its advertising business.
Last week, Meta reported it brought in more than $196 billion in revenue from advertising in 2025. That's a year-over-year increase of about 22%.
Meta also reported an operating margin of 41% for 2025. So it's safe to say that advertising is a viable avenue for "cheap money" for the company...
Apple already has the means to advertise to its 2.5 billion active devices. I'm talking about its App Store and other services, like Apple TV and Apple Music.
Advertising falls under Apple's Services segment. In the most recent quarter, this segment's sales grew by 14% year over year. And Q.ai could help it even more...
As I said, this startup specializes in facial-recognition technology. One of its founders is also a familiar name to Apple...
You see, Q.ai co-founder Aviad Maizels helped start the company responsible for Apple's Face ID technology.
Folks, I hope you see where I'm going with this...
Apple knows its devices are selling well. But cost factors could put pressure on margins.
Apple also knows that humans convey valuable, nonverbal information with their faces.
Put simply, Apple might hope to tap into your face to advertise to you better.
Better facial-recognition technology could tell whether you found an advertised product interesting or not... potentially before you consciously realize it.
Sure, consumers don't love ads. But they love to open their wallets for products they find interesting.
So facial recognition could be a big deal to the business of advertising... and to Apple's revenue stream.
To be clear, folks, there's no official confirmation that this is going on. I'm doing some speculating here.
But the tech giants like Apple know just how lucrative advertising is...
And with cost pressures for device components, I wouldn't be surprised to see Apple leverage its new tech for better advertising – and, by extension, more revenue.
If Apple doesn't spell out plans for using facial-recognition tech for advertising, a surge in the company's Services sales could indicate I was right.
For now, it's just a theory.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
-0.24%
7
21
2
S&P 500
-0.3%
111
276
113
Nasdaq
-1.2%
28
47
31
Small Caps
-1.41%
624
944
321
Bonds
-0.56%
Consumer Staples
+1.68%
4
23
9
— According to the Chaikin Power Bar, Small Cap stocks are more Bullish than Large Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+3.78%
Communication
+2.67%
Utilities
+1.62%
Industrials
+0.74%
Consumer Staples
+0.72%
Financial
+0.7%
Real Estate
+0.44%
Information Technology
-0.83%
Materials
-1.4%
Consumer Discretionary
-1.59%
Health Care
-1.74%
* * * *
Industry Focus
Innovative Technology Services
17
84
46
Over the past 6 months, the Innovative Technology subsector (XITK) has underperformed the S&P 500 by -22.14%. Its Power Bar ratio, which measures future potential, is Weak, with more Bearish than Bullish stocks. It is currently ranked #18 of 21 subsectors and has moved up 1 slot over the past week.
Indicative Stocks
CNXC
Concentrix Corporati
ZS
Zscaler, Inc.
BL
BlackLine, Inc.
* * * *
Top Movers
Gainers
DECK
+19.46%
VZ
+11.83%
CHTR
+7.62%
SNDK
+6.85%
APD
+6.44%
Losers
APP
-16.89%
KLAC
-15.24%
NEM
-11.49%
WDC
-10.12%
STX
-8.71%
* * * *
Earnings Report
Earnings Surprises
LYB LyondellBasell Industries N.V.
Q4
$-0.26
Missed by $-0.51
SOFI SoFi Technologies, Inc.
Q4
$0.12
Beat by $0.01
CHTR Charter Communications, Inc.
Q4
$10.42
Beat by $0.69
REGN Regeneron Pharmaceuticals, Inc.
Q4
$11.44
Beat by $0.69
CVX Chevron Corporation
Q4
$1.52
Beat by $0.08
* * * *
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