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Apple Stock Dips as AI Hype Fizzles: Jefferies Downgrades to Hold

AInvestMonday, Oct 7, 2024 3:00 pm ET
1min read

Apple's stock recently experienced a decline exceeding 1% following Jefferies analyst Edison Lee's suggestion that investor expectations for the latest iPhone were overly ambitious. The new model, touted as the first to integrate AI features, did not meet anticipated market enthusiasm. Lee pointed out that expectations for the iPhone 16/17 series might be premature, due to limited AI functionality and a lack of groundbreaking features.

Since April, Apple's stock had surged approximately 36%, fueled by optimism that AI capabilities would prompt consumers to upgrade, thereby boosting revenue. However, early market response indicates that demand may not be as robust as predicted. Jefferies has consequently adjusted its Apple stock rating from "buy" to "hold."

Despite recognizing the long-term potential of AI and Apple's unique position to offer low-cost, personalized AI services through hardware-software integration, Lee noted that Apple’s current valuation appears inflated. He cautioned that significant AI-driven growth would necessitate redesigning smartphone hardware, potentially not materializing until 2026 or 2027.

This cautious stance is reflected in the broader financial community, with only 65% of analysts recommending Apple as a buy, compared to higher rates for other tech giants. As analysts and investors closely monitor early demand data for the new iPhone, any revenue acceleration hopes remain tentative, with some projections being revised down.

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