Due to the decline in pre-order sales of the recently launched iPhone 16 series, which is equipped with AI tools, Apple’s stock price dropped from $229.78 to $225.78 on October 9. According to the U.S. investment trading platform “Moomoo,” although Apple’s stock has risen by 36% since its April low, many had optimistically believed that AI features would drive phone upgrades and boost Apple’s revenue growth. However, early signs suggest that market demand is not as strong as expected.
Korean media outlet DealSite, citing industry insiders, reported that although the iPhone 16 sold out quickly in the initial stages in markets like China, the U.S., and Korea, this doesn’t necessarily indicate strong demand. Instead, it is due to limited stock availability. According to industry sources, global pre-orders for the iPhone 16 have decreased by about 13% compared to the iPhone 15.
Additionally, Apple was recently downgraded by the well-known U.S. investment bank Jefferies. Analyst Edison Lee downgraded Apple’s stock rating from “Buy” to “Hold,” citing concerns that expectations for the new AI-enabled iPhone were too high. Lee predicts that Apple’s stock price may drop by around 6%, to $213.
Edison noted that current smartphone hardware is not advanced enough to meet the high expectations of tech-savvy AI analysts and iPhone consumers. In his latest report, he wrote that high expectations for the iPhone 16 or even iPhone 17 are unrealistic. The lack of substantial new features and limited AI capabilities mean that the anticipated market growth (5%-10% in sales) is unlikely to be achieved.
In his report, Edison stated, “Smartphones, unlike AI servers, lack high-speed memory and advanced packaging technology, limiting their AI capabilities. It is too early to expect AI to accelerate the smartphone replacement cycle.” He added that manufacturers like Apple will need another two to three years to develop smartphone hardware capable of smoothly running AI software.
At this year’s Worldwide Developers Conference in June, Apple introduced a suite of AI tools called “Apple AI.” The long-anticipated debut of Apple’s AI and its collaboration with OpenAI pushed its stock price to a record high. This alleviated investor concerns over a string of bad news earlier this year, including sluggish iPhone sales, layoffs, and conflicts with domestic and foreign antitrust regulators. Bank of America analyst Wamsi Mohan predicted that Apple’s future AI “smartphones” would dominate the market.
However, the Korea Times reported that initial sales of the iPhone 16 series have generally fallen below expectations. Citibank even lowered its performance estimates for Apple’s iPhone division for the September and December quarters as a result.
Yahoo Finance also noted that the iPhone 16, Apple’s first phone equipped with AI, has so far disappointed Wall Street. Analysts pointed out that consumer demand for Apple’s latest smartphones is weaker than for previous iPhones. According to the latest consumer survey by JPMorgan, while the iPhone 16 offers faster connection speeds, few people see the upcoming AI features as a primary motivation to purchase.
Jefferies is not the only firm with a pessimistic outlook on the iPhone 16. The Spanish financial website FXStreet reported that the UK’s Barclays Bank expressed similar concerns earlier this month. Barclays analysts, after conversations with suppliers, have downgraded their iPhone 16 sales expectations. “Based on our recent supply chain checks, Apple may have just cut production of key iPhone semiconductor components by about 3 million units for the quarter ending in December. If confirmed, this would be the earliest order cut in the latest phone sales cycle.” The iPhone 16 was only launched about a month ago, and if this news is accurate, it could significantly impact next year’s profits. The iPhone still accounts for nearly 60% of Apple’s revenue.
Barclays analysts also pointed out that the phased rollout of the “Apple AI” platform is a key obstacle to early sales. Apple plans to launch its “Apple AI” features in the U.S. in mid-October, with support for other languages scheduled for next year. This could further delay initial demand.
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