Apple Inc. investors are losing patience with the company\u2019s talk about becoming a more formidable presence in artificial intelligence and want to start seeing some results.<\/p>\n
\u201cThere\u2019s a bit of fatigue with Apple and AI,\u201d said Tim Chubb, chief investment officer at Girard, a Univest Wealth Division, which owns the stock in an underweight position. \u201cIt\u2019s hard to extend them the same benefit of the doubt we used to since there have been so many delays.\u201d<\/p>\n
Wall Street was hoping the iPhone maker would come out strong at its annual Worldwide Developers Conference last week, but its presentations were considered underwhelming and the timing of product availability disappointed. The overhauled Siri AI assistant will launch this fall but as a beta version, meaning it remains a work in progress. And the latest AI features won\u2019t initially be available in the European Union or China, two key markets. <\/p>\n
The news dashed hopes that Apple\u2019s AI strategy is firmly on track and ready to spur a long-awaited upgrade cycle for iPhone customers. The stock is coming off its worst week since February, and its 10% gain this year is well shy of the technology-heavy Nasdaq 100 Index\u2019s 19% rise.<\/p>\n
Apple shares had rallied into the conference, soaring 15% in May for their best month since July 2022. And the stock caught a bid on Tuesday after a Bloomberg report that the company\u2019s camera-equipped AirPods, a next-generation foldable phone and a fresh iPhone model all will launch in 2027. The shares were up 0.5% in early trading Wednesday.<\/p>\n
But investors were hoping that the conference would showcase the company\u2019s position as a leading innovator, especially in the wake of AI features it unveiled in 2024 but that have been delayed since then. Instead, the reviews were largely muted, with analysts not bothering to adjust their revenue estimates for 2027 or 2028, according to data compiled by Bloomberg. <\/p>\n
Apple is expected to deliver revenue growth of nearly 15% in its 2026 fiscal year, which ends in September, up significantly from 6.4% in fiscal 2025. But analysts see that pace slowing to 8.6% in fiscal 2027 and decelerating further in the subsequent two years.<\/p>\n
A weaker or delayed iPhone upgrade cycle could pressure Apple shares, which trade at more than 33 times estimated earnings over the next 12 months, well above their 10-year average of 23. It\u2019s the second most expensive stock among the Magnificent Seven tech giants, trailing only high-flying Tesla Inc.<\/p>\n
\u201cWhat we saw didn\u2019t make me excited enough to want to upgrade,\u201d Chubb said. \u201cThe valuation looks rich when you consider it reflects upward revisions that haven\u2019t happened yet, based on a product that hasn\u2019t launched yet, and which has been delayed multiple times. It\u2019s priced as though we know it\u2019s going to execute, when in reality they\u2019ve had a number of execution missteps over the past couple of years.\u201d<\/p>\n
To be sure, plenty of Wall Street pros continue to view Apple as well positioned to benefit as consumers access external AI services through its hardware. The problem is the features it unveiled at the conference were seen as modest, especially relative to offerings from Anthropic, OpenAI, or Alphabet Inc., whose Google Gemini technology is a key underpinning to Apple\u2019s foundation AI models. <\/p>\n
The event \u201cwas where Apple Intelligence was supposed to drive an upgrade cycle, but this seems to no longer be the case,\u201d Brandon Nispel, an analyst at KeyBanc Capital Markets, wrote in a June 8 note. The presentation featured \u201cno clear signs of monetization of AI,\u201d a heavy reliance on Gemini, \u201cvery few use cases where Apple App integration was materially beneficial\u201d and \u201ca slightly better standalone Siri, which is still worse than other LLMs,\u201d he added.<\/p>\n
Apple executives also failed to address how AI could drive revenue upside, earnings growth or cost savings, according to Needham\u2019s Laura Martin. The company \u201cdid nothing to suggest that it can up-charge for its AI tools and capabilities, or save money from using AI,\u201d she wrote on June 9, adding that Apple looks overly dependent on Alphabet, \u201cits biggest competitor in its core (smartphone) business.\u201d<\/p>\n
That said, the bull case for Apple is easy to see by just looking at its financials: a huge amount of cash on hand, a pristine balance sheet, steady earnings growth and regular buybacks \u2014 something that other megacap tech stocks aren\u2019t engaged in the way they have in the past. Furthermore, while the company may not be a major player in AI, at least not yet, it doesn\u2019t face risks related to heavy capital expenditures or AI disruption, which is what\u2019s hitting software stocks.<\/p>\n
\u201cApple is exceptionally high quality, and the competitive position isn\u2019t eroding right now,\u201d said Jed Ellerbroek, portfolio manager at Argent Capital Management. \u201cI still hold open the possibility that if Apple can deliver some great technology that really streamlines my life, then we could see the kind of upgrade cycle we\u2019re hoping for.\u201d<\/p>\n
However, the company\u2019s latest updates did little to convince him that a dramatic transformation is imminent. <\/p>\n
\u201cIt wasn\u2019t terrible, but it wasn\u2019t super encouraging either,\u201d Ellerbroek said. \u201cIt was just kind of boring, and it adds to the AI cloud hanging over the stock. When it comes to Apple and AI, I feel like Charlie Brown with the football.\u201d<\/p>\n
Vlastelica writes for Bloomberg.<\/p>\n","protected":false},"excerpt":{"rendered":"Apple Inc. investors are losing patience with the company\u2019s talk about becoming a more formidable presence in artificial…\n","protected":false},"author":2,"featured_media":77262,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[24,2034,319,42237,42236,25,15554,532,2488,42238,23164,42235,33784,1016,35516,573],"class_list":["post-77261","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ai","tag-ai","tag-analyst","tag-apple","tag-apple-investor","tag-apple-share","tag-artificial-intelligence","tag-bloomberg-report","tag-company","tag-conference","tag-earning-growth","tag-gain","tag-long-awaited-upgrade-cycle","tag-presentation","tag-stock","tag-tangible-progress","tag-year"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/77261","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=77261"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/77261\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/77262"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=77261"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=77261"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=77261"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}