Apple faces mounting pressure as investor concerns grow over AI progress

Apple Inc.’s move to shutter its electric car efforts and divert those resources to artificial intelligence projects might have emboldened traders a year ago. Instead, the stock’s slump has only deepened.

The Cupertino, California-based firm has revealed very little about its AI efforts, with Chief Executive Officer Tim Cook promising the company’s shareholders last week that Apple would “break new ground” in AI. Investor impatience is growing, with the stock slumping 9% this year, pulling its market value below Microsoft Corp.’s.

“There’s been a real focus on how Apple hasn’t come out with some killer product in a very long time,” said David Klink, senior analyst of equity research at Huntington National Bank. “Obviously it’s been kind of a hard time for Apple holders to watch Nvidia and whatnot.”

Apple’s pivot comes as iPhone sales remain sluggish, with sales in China plunging during the first six weeks of this year. Its biggest new product release in years, the Vision Pro headset, is a long way off from contributing to sales growth in any meaningful way.

Wall Street is becoming more skeptical of the megacap giant. Apple was recently removed from Goldman Sachs’ conviction list and Evercore ISI’s tactical outperform list. The company has the lowest ratio of buy ratings to holds and sells since 2020.

“Forget the car, what matters most for this stock is the AI strategy launch,” Melius Research analysts led by Ben Reitzes wrote in a note dated March 4. “To us, it is the most important launch since the iPhone.”

While Apple’s move away from EVs has been broadly welcomed, analysts are looking for the company to release its own generative AI product. Samsung Electronics Co.’s updated Galaxy line of smartphones can live-translate phone calls, transcribe voice recordings and use generative AI to fill in parts of photos.

“Samsung has a generative AI phone right now and is getting a lot of positive buzz about it, and Apple doesn’t yet,” noted Rhys Williams, chief strategist at Wayve Capital Management. “Apple doesn’t have some of the current momentum drivers and so it’s lagging a bit, so I think it’ll be a second half story if some of these new products actually get out the door.”

Still, for bulls, the firm’s potential to capture public imagination with an AI enhancement means that investors should be patient. Melius analysts see new AI services driving users to upgrade their iPhones, kicking off a “supercycle” in 2025.

“It’s time for a deep breath,” wrote Melius’s Reitzes, noting that 99% of Apple’s installed base of more than 2.2 billion devices “are never going to switch to Android — so a ‘comeback’ is likely.”

And, long-time investors say that being a late mover is nothing new for Apple. Counting them out in the early innings of the AI cycle would be a mistake, according to Robert Conzo, CEO and managing director at The Wealth Alliance LLC.

“Apple’s doing what Apple does best — it kind of waits, sits back and then sees how it’s going to position its products to take advantage of the AI craze,” he said.

Apple Inc. has erased more than $300 billion in market value since its shares closed at a record in December and has entered a technical correction for the first time since August. A disappointing forecast, shrinking business in China, hefty regulatory fines and a lack of new hit products caused the iPhone maker’s stock to drop more than 10% from its peak, underscoring the risks to its supply chain in particular. Bloomberg