AI is turning Apple into a market "loser"
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Apple stock is down 15% this year, even as other Big Tech firms like Nvidia rally to new all-time highs.
- Worries about Apple's ability to compete on artificial intelligence, to weather tariff policy, and to outgrow competitors are piling up.
Why it matters: Wall Street consensus is that the company is behind on artificial intelligence and running short on time to do something about it.
What they're saying: Apple "needs the AI story because that's what's being rewarded in the market," Dave Mazza, chief executive officer of Roundhill Investments, tells Axios.
- "Until that changes, I think they're gonna be looked at…as a loser," he says.
Catch up quick: Apple has a history of redefining itself, Mazza says. Just look at the journey from iPods to iPhones.
- But the company also takes its time on adoption historically, and has largely failed to deliver on its Apple Intelligence promises, disappointing investors at the latest Worldwide Developers Conference.
- "Apple is at a highway rest stop on a bench watching this 4th Industrial Revolution race go by at 100 miles an hour," writes Dan Ives, Wall Street's favorite tech bull, in a note to clients.
- The company is under pressure from a slew of headwinds, including tariff threats, executive departures and concerns about its pace of innovation.
- Axios reached out to Apple for comment and did not receive a response.
What's next: The time has come and gone for Apple to win on AI on its own, according to Ives. It's time for an acquisition.
- "Apple needs to acquire Perplexity to significantly boost its AI platform," he writes. "If Apple has to pay ~$30 billion its a drop in the bucket relative to the monetization opportunity Apple can achieve on AI in our view."
Reality check: Apple has plenty of income from other businesses while figuring out its AI strategy.
- Services, the fastest-growing part of the company's business, accounted for nearly a quarter of its revenue as of September 2024, according to FactSet.
- A weaker dollar will buoy Apple earnings, with nearly 60% of its revenue generated outside of the U.S. $80 billion cash on its balance sheet gives the company flexibility to weather the storm.
The bottom line: Apple has 24 to 36 months before it has its own AOL moment, according to Brian Mulberry, client portfolio manager at Zacks Investment.
- "With the cash they have on hand and the loyalty they have…there would have to be something disruptive in the marketplace that would draw away customers. It's not there yet," he says.
