Apple is heavily underperforming QQQ; Why is AAPL lagging behind its tech peers?

Big Tech stock's march continues at full throttle, propelling the broader equity market to high after high. Amidst this uptrend, the Invesco QQQ, an exchange-traded fund (ETF) that tracks the tech-heavy Nasdaq-100 index, rose more than 10% year-to-date, closing at a new record high of 445.61 on Friday.

Remarkably, the QQQ’s ascent has been driven by only a handful of Big Tech firms, most notably the burgeoning AI chipmaker NVIDIA Corporation (NASDAQ:NVDA). On the other hand, Apple Inc (NASDAQ:AAPL) stock, alongside Tesla Inc (NASDAQ:TSLA) continues its underperformance, losing more than 9% and 24%, respectively, since the start of 2024.

The AAPL/QQQ divergence

Weighing in on this matter, a BTIG technical analyst observed a significant divergence between AAPL and QQQ, noting that the tech giant’s Relative Strength Index (RSI) is unusually low compared to the latter. 

According to the analyst, such a discrepancy hasn’t been since Volmageddon – a major market event in 2018 marked by an unexpected and extreme volatility spike. 

“Apple (AAPL, Not Rated) daily RSI is at 27 while QQQ daily RSI is at 66. Since QQQs inception in 1999, there has never been a day when AAPL's RSI was below 30 while QQQs RSI was above 65, like it is now,” the analyst said in a Monday note. 

“If we loosen the parameters to AAPL RSI sub-35, there is only one other time: Jan 29th-31st, 2018, right before 'volmageddon,’” he added. 

Does the AAPL/QQQ divergence signal another Volmageddon-like downturn?

The BTIG analyst doesn’t think so. While they acknowledged that there is potential for increased market volatility or correction, they seem to assess the current financial and economic indicators as not aligning with those preceding the extreme volatility of Volmageddon.

“There have been lots of 'signals' over the last few weeks that we haven't seen since either the Aug. '20 'tech whale blowoff' or 2018's 'volmageddon'. None of these have led to any sort of pullback on the indices,” wrote the analyst. 

“Despite that, the dispersion under the surface shouldn't be ignored. Yes, it's encouraging to see some broadening beyond the 'AI' trade, but the continued one-way move in many momentum names is ultimately going to have some ramifications, even if only short-term in nature,” he added.

Why is AAPL stock underperforming the QQQ?

BTIG analysts believe the discrepancy between Apple stock and QQQ “is likely to resolve,” potentially through an upturn in AAPL's value or a downturn in QQQ's. The broker thinks the latter scenario is more likely to happen, although they have been proven wrong so far. 

Recently, Apple stock has made 2.5-year lows against the tech-oriented ETF. While the company has faced notable challenges lately – lagging domestic sales, poor Vision Pro reviews, and regulatory headwinds in China – one particular obstacle the iPhone maker seems to be facing is its unfavorable position in the AI boom. 

This may have inadvertently turned Apple stock into a source of funds, enabling investors to redirect capital towards leading AI leaders such as NVDA and Microsoft Corporation (NASDAQ:MSFT), which have been the primary drivers of QQQ’s record-breaking rise.