Apple's Market Value Drops 19% Amid Tariffs and AI Struggles

Investors are urging Apple to shift its strategy and pursue mergers and acquisitions, following a significant loss of over $630 billion in market value this year. The tech giant has faced challenges due to its heavy reliance on Chinese operations, exacerbated by the announcement of reciprocal tariffs in April. The company's stock dropped sharply, declining by roughly 19% in just three days following the introduction of the levies. Even after the tariffs were paused, Apple's progress was hindered by regulatory hurdles and the failure to deliver compelling AI innovations.

Apple has traditionally been cautious about making acquisitions or mergers, unlike many other tech companies. However, analysts like Atif Malik from Citigroup Inc. argue that investing in or buying a meaningful stake in AI firms could greatly benefit the company. Malik noted that Apple's last significant acquisition was the $3 billion deal to buy Beats a decade ago. Reports from last month suggested that Apple might be exploring a bid for the AI startup Perplexity AI, valued at over $14 billion. This acquisition could bolster Apple's talent pool and advance the development of an AI-powered search engine. Dan Ives, an analyst at Wedbush, has also backed the idea, calling it a “no-brainer” and suggesting that the investment would be worthwhile even if Apple had to pay $30 billion for it.

Apple's stock has dropped 16% this year, with recent AI launches, including those showcased at the Worldwide Developers Conference, failing to impress investors. The company also faced a legal setback when it lost an appeal in court, failing to prevent a ruling that permits developers to provide alternative purchase links outside the App Store without paying commission. Apple has contested the ruling, stating that it would result in “grave irreparable harm” for its operations. The company is also disputing the finding that it failed to comply with a 2021 injunction. Several developers, including Epic, Amazon, and Spotify, have already modified their apps to allow users to bypass Apple’s payment methods.

In contrast to Apple, Meta Platforms Inc. has seen more positive outcomes with its AI offerings and is setting its sights on more aggressive investments in AI. Kevin Cook, a senior stock strategist, has encouraged Apple to follow Meta’s lead by recruiting more AI experts. Cook maintains that Apple’s AI failures are being overstated and does not advocate for the company to make any big alterations. He commented, “A refocus on AI talent is what’s needed. Apple certainly has challenges, but this isn’t like Google, which could more easily have been usurped by competitors if it fell behind.”

Meta CEO Mark Zuckerberg has actively sought to boost the company’s AI talent, extending a lucrative offer worth hundreds of millions to Apple’s AI models team, which Apple chose not to match. The iPhone firm recently lost a key artificial intelligence executive to rival Meta Platforms Inc., damaging its generative AI ambitions. Ruoming Pang, a distinguished engineer and head of Apple’s foundation models team, is joining Meta’s newly established superintelligence group. Pang came to Apple in 2021 from Alphabet and led a team of around 100 engineers working on the large language models powering the company’s “Apple Intelligence” features across its devices. Meta also pledged a $14.3 billion investment in Scale AI. With over $133 billion in cash and marketable assets at the end of March, Apple remains well-positioned to rival Meta in AI investment, boasting nearly twice as much liquidity.