Apple's Q2 iPhone Surge May Be Short-Lived Amid Tariff Uncertainty

Apple's Q2 may seem strong due to iPhone shipments tracking ahead of expectations, but JPMorgan analyst Harlan Sur believes the demand spike was fueled by a one-time trigger: a pause on smartphone tariffs. Sur expects smartphone fundamentals to weaken in the second half of the year as the effects of pre-tariff hoarding fade and macro uncertainty kicks in. This could spell trouble for Apple and its chip suppliers like Broadcom and Qorvo.

Apple Inc.'s (AAPL) second quarter (Q2) financial results have been hailed as a testament to the strength of its iPhone sales, with shipments tracking slightly ahead of expectations [1]. However, JPMorgan analyst Harlan Sur cautions that the demand spike may have been driven by a one-time trigger: a pause on smartphone tariffs [1]. Sur expects smartphone fundamentals to weaken in the second half of the year as the effects of pre-tariff hoarding fade and macro uncertainty kicks in [1]. This could spell trouble for Apple and its key chip suppliers like Broadcom Inc. (AVGO) and Qorvo Inc. (QRVO), who benefited from the second quarter surge but may face reduced orders in the third quarter [1].

While Apple's Q2 may show solid beats, JPMorgan's analysis suggests it's less about sustainable strength and more about strategic stockpiling [1]. The real test for iPhone demand—and the chip stocks tied to it—may just be getting started [1]. Trade and tariff uncertainty still hang over the second half of the year, potentially reducing consumer purchasing power as Apple's next iPhone cycle ramps up [1].

Broadcom, a key supplier of Apple's iPhone chipsets, has undergone a remarkable transformation, evolving from a key supplier of smartphone chipsets to a titan in the AI revolution [2]. Its 2023 acquisition of VMware supercharged its infrastructure software portfolio, driving a 44% surge in infrastructure software revenue to $6.6 billion in the second quarter [2]. Broadcom's AI business is the cornerstone of its $2 trillion ambition, with AI revenue surging 46% year-over-year to $4.4 billion in the second quarter [2]. CEO Hock Tan envisions a $60 billion to $90 billion AI chip market by 2027, with Broadcom potentially capturing up to 70% of it [2].

To reach a $2 trillion market cap, Broadcom's stock price must climb from $275 to approximately $426, a 55% increase with 4.7 billion shares outstanding [2]. A forward P/E ratio of 30, fairly aligned with its current 33x, supports this target if earnings reach $8 to $10 per share by 2026, up from $6.62 per share projected for FY2025 [2]. A $10 billion stock buyback program could further boost EPS, enhancing stock price growth and investor confidence [2].

However, Broadcom faces significant challenges, including a slightly premium valuation and dependence on a few hyperscale clients [2]. Geopolitical tensions, particularly following Nvidia's recent success in resuming H20 chip sales to China, could intensify competition and disrupt growth [2].

In conclusion, while Apple's Q2 results may have been impressive, the real test lies ahead. Investors should brace for more muted updates in the coming months as the effects of pre-tariff hoarding fade and macro uncertainty kicks in. Broadcom, on the other hand, faces a challenging yet exciting journey as it aims to join the exclusive $2 trillion market cap club.

References:
[1] https://www.benzinga.com/markets/tech/25/07/46495889/apples-q2-was-the-party-q3-might-be-the-cleanup
[2] https://247wallst.com/investing/2025/07/15/can-broadcom-hit-a-2-trillion-market-cap-by-2027/