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By Aditya Soni

July 29 (Reuters) - Apple's decision to hold iPhone prices steady is set to power its strongest June-quarter sales growth in five years, but investors will want to know how long it can resist an increase.

The consumer ‌electronics giant raised iPad and MacBook prices last month as it sought to offset cost increases from a shortage of ‌memory and storage chips caused by massive AI datacenter buildouts.

But the company spared its cash cow, iPhones, even as rival smartphone makers were forced to pass on ​the higher costs that prompted a decline in global smartphone shipments in the April-June quarter, to the lowest in 13 years.

Apple's decision paid off: iPhone shipments rose 3% and the company's market share climbed to nearly a fifth, estimated research firm Counterpoint.

This, and the fact that it has not spent hundreds of billions of dollars on data centers have helped it reclaim the title of the world's most valuable company from Nvidia ‌after two years as doubts about the AI ⁠boom grow.

Apple shares, up nearly 25% so far this year, briefly pushed the company's market value above $5 trillion for the first time on Tuesday, and have widely outperformed the rest of the stocks among the "Magnificent ⁠Seven".

"Apple was initially scorned by many investors for not joining the AI investment cycle. Now, it is actually being rewarded as investors question the relationship between (Big Tech's) spending and return on investment," said Dan Morgan, portfolio manager at Synovus Trust, which owns Apple shares.

Last week, Alphabet stunned investors with ​a ​negative free cash flow for the first time in its history.

Morgan said he ​expects Apple to increase prices later this year, which ‌could dampen demand and put pressure on a company whose high valuation does not leave "a lot of room for error."

Analysts expect Apple to raise prices when it releases its next iPhone series, which typically happens in September.

Earlier this month, the company raised the price of Apple Music and Apple One, a subscription bundle for multiple Apple services.

IPHONE TO POWER STRONG REVENUE GROWTH

The company is expected to report that revenue rose 15.5% to $108.65 billion in the April-June period, Apple's fiscal third quarter, according to data compiled by LSEG.

That is slightly slower than ‌the previous three months, but marks the strongest third-quarter sales growth since ​2021.

Profit growth is also expected to slow slightly to 18.1% as gross margin slips ​to 47.9% from 49.3% in the previous quarter.

Some analysts said ​the popularity of Apple's devices and its strong ecosystem is likely to stave off any major demand ‌hit for iPhones from price hikes, which could protect margins.

"Apple's ​core product demand has been somewhat ​inelastic, with iPhone being the most inelastic product within Apple's product ecosystem, followed by Mac and then iPad," Morgan Stanley analysts said.

"This generally means that recent price increases are unlikely to materially disrupt demand, especially considering supply challenges at peers."

IPhone sales ​likely increased 20.8% in the period, also ‌marking the strongest third-quarter growth since 2021.

Mac revenue growth is expected to improve to 8.7% from 5.7% in the previous ​quarter, despite the price increase, but iPad sales are expected to slow slightly to 5.2% from 8% in the ​second quarter.

(Reporting by Aditya Soni in Bengaluru; Editing by Sayantani Ghosh)