Apple shares moved higher in early Monday trading, matching U.S. stocks's upside move tied to investors' hope for relief from the Trump administration's tariff threats, but the tech giant is likely face serious headwinds in coming months following its fumbled AI strategy.
Apple ( AAPL ) remains firmly in correction territory in the wake of a 15% slump from its late-December peak. The move lopped more than $630 billion from its market value, as investors retreated from the Magnificent 7 tech stocks and amid concern about the rollout of its Apple Intelligence AI system.
Last week, in fact, Chief Executive Tim Cook reportedly orchestrated a rare shakeup of his top executive ranks, tapping Vision Pro creator Mike Rockwell to oversee product development for Siri.
That move followed a bungled upgrade of the tech giant's virtual assistant and delays in the release of features designed to enhance its artificial-intelligence features and drive sales of its newly released iPhone 16.
Wedbush analyst Dan Ives, a committed Apple bull who carries a $325 price target and an outperform rating on the tech giant, estimates its AI delays will remove around 10 million iPhone handset sales from its fiscal 2025 tally. But he sees that total improving over the following fiscal year, which begins in October.
That said, any further delays in the Apple Intelligence rollout, or even the release of underwhelming features that fail to capture users' imagination, will likely erode confidence in the group's ability to entice users to buy into the next round of smartphone upgrades.
Apple prepares for impact of Trump tariffs
Apple is also bracing for the impact of tariffs on goods from China, which currently come with a 20% levy. And that figure could increase as President Donald Trump ramps up his broader economic strategy by targeting nations that have persistent trade surpluses with the U.S.
Morgan Stanley analyst Erik Woodring, who reiterated his overweight rating and $252 price target in a note published Monday, is seeing an increase in China-based hardware production in March. But he argues this likely results from trade-war issues between Washington and Beijing.
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"While we highlighted increased iPhone assembly visibility and China's electronics subsidies as potential upside risks last month, we believe the increase this month reflects Apple pulling forward production to mitigate U.S./China tariffs," he added.
Apple has attempted to mitigate some of that tariff impact, however, by courting officials with new investment plans.
Last month, Apple touted spending $500 billion over the next four years on U.S.-based projects, a figure that represents around 40% of its planned capital outlays, while winning Trump's endorsement for the 20,000 jobs the investment is likely to create.
Cook is also set to woo officials in Beijing this week following a visit to the state-sponsored China Development Forum on Sunday and a planned appearance at a developers' conference in Shanghai on Tuesday.
Apple's China diplomacy
Apple also unveiled a partnership with Alibaba ( BABA ) that will see Asia's biggest tech company support Apple's AI rollout in China last month.
Demand in China itself is on the wane as a result of stiffer domestic competition and a pullback in consumer spending. Reports have also suggested that Beijing has banned the use of iPhones by government employees and state-backed enterprises in order to support the launch of Huawei's new Mate 60 handset.
Jefferies analyst Edison Lee, who carries an underperform rating and $202.33 price target on Apple stock, said iPhone sales were falling far faster than their Android-based ( GOOGL ) rivals in the world's biggest smartphone market.
"That indicates the launch of iPhone 16e (shipment started on February 28) has not been able to support overall iPhone sales in China, even though 16e is covered by the government subsidy program," he said.
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Apple posted December-quarter revenue of $124.3 billion, its highest-ever holiday tally, even as iPhone sales slipped amid the uneven Apple Intelligence rollout. Services revenue rose 14% to $26.3 billion.
The group also posted a record bottom line of $36.3 billion, a 10% increase from the year-earlier period.
Finance chief Kevan Parekh, meanwhile, said Apple's current-quarter revenue would likely rise in the low- to mid-single-digits percent, an advance that likely translates to a tally of between $91.7 billion and $95.3 billion.
Apple shares were marked 0.86% higher in premarket trading to indicate an opening bell price of $220.15.
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