Apple's AI Lag and Slowing iPhone Replacement Demand Prompt Market Concerns

Apple has been the worst performer among the "Magnificent Seven" tech stocks this year, and Needham has become the latest member to join the growing bearish camp, downgrading the stock from "Buy" to "Hold." Analyst Laura Martin highlighted multiple risks, including intensifying competition, slowing growth, and elevated valuation.
In fact, Needham is not alone in losing confidence in
. In May, and Rosenblatt Securities also downgraded the stock, while , MoffettNathanson, Loop Capital, Aletheia Capital, and DBS Bank had already cut their ratings earlier in 2025.Data shows that less than 60% of analysts currently maintain a "Buy" recommendation on Apple- the lowest among mega-cap tech stocks and far below competitors like Microsoft (MSFT.US), Amazon (AMZN.US), Nvidia (NVDA.US), and Meta (META.US), which all enjoy over 90% buy ratings.
Needham's research report highlights deeper strategic concerns for Apple: First, the slowing growth of the smartphone market and extended iPhone replacement cycles, with analyst Laura Martin bluntly stating that "a major upgrade cycle is unlikely in the next 12 months." Second, Apple's competitive disadvantage in artificial intelligence, where its lack of breakthrough innovations in generative AI could threaten its dominant position in the hardware ecosystem. OpenAI's acquisition of a startup co-founded by legendary designer Jony Ive further underscores Apple's lag in AI hardware development.
Additionally, while Apple is accelerating supply chain diversification to mitigate trade risks, it remains heavily reliant on Chinese manufacturing in the short term. The combination of tariff uncertainties and intensifying competition in the Chinese market has already put pressure on its iPhone business. Meanwhile, the company is attempting to pivot toward diversifying its services business, but the expansion of high-margin segments like advertising still requires time to prove its viability.
For Apple to regain investor confidence, it needs breakthroughs in two key areas: first, accelerating the commercialization of AI technology, and second, introducing truly disruptive new product categories. However, against the backdrop of overall weak consumer electronics demand, achieving these goals will be no easy task.
Comments
No comments yet