Apple Inc. investors are losing patience with the company’s talk about becoming a more formidable presence in artificial intelligence and want to start seeing some results.
“There’s a bit of fatigue with Apple and AI,” said Tim Chubb, chief investment officer at Girard, a Univest Wealth Division, which owns the stock in an underweight position. “It’s hard to extend them the same benefit of the doubt we used to since there have been so many delays.”
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’t initially be available in the European Union or China, two key markets.
The news dashed hopes that Apple’s 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’s 19% rise.
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’s 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 on Wednesday.
But investors were hoping that the conference would showcase the company’s position as a leading innovator, especially in the wake of AI features it unveiled in 2024 but 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.
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.
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’s the second most expensive stock among the Magnificent Seven tech giants, trailing only high-flying Tesla Inc.
“What we saw didn’t make me excited enough to want to upgrade,” Chubb said. “The valuation looks rich when you consider it reflects upward revisions that haven’t happened yet, based on a product that hasn’t launched yet, and which has been delayed multiple times. It’s priced as though we know it’s going to execute, when in reality they’ve had a number of execution missteps over the past couple of years.”
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’s foundation AI models.
The event “was where Apple Intelligence was supposed to drive an upgrade cycle, but this seems to no longer be the case,” Brandon Nispel, an analyst at KeyBanc Capital Markets, wrote in a June 8 note. The presentation featured “no clear signs of monetization of AI,” a heavy reliance on Gemini, “very few use cases where Apple App integration was materially beneficial,” and “a slightly better standalone Siri, which is still worse than other LLMs,” he added.
Apple executives also failed to address ways in which AI could drive revenue upside, earnings growth or cost savings, according to Needham’s Laura Martin. The company “did nothing to suggest that it can up-charge for its AI tools and capabilities, or save money from using AI,” she wrote on June 9, adding that Apple looks overly dependent on Alphabet, “its biggest competitor in its core (smartphone) business.”
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 — something that other megacap tech stocks aren’t 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’t face risks related to heavy capital expenditures or AI disruption, which is what’s hitting software stocks.
“Apple is exceptionally high quality, and the competitive position isn’t eroding right now,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. “I 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’re hoping for.”
However, the company’s latest updates did little to convince him that a dramatic transformation is imminent.
“It wasn’t terrible, but it wasn’t super encouraging either,” Ellerbroek said. “It 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.”
Tech Chart of the Day
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
More Closed End Funds Topics >
