Apple's Struggles in the AI Era and Overvaluation Risks

The tech landscape is shifting, and Apple (AAPL) is increasingly caught in the crosshairs of a dual threat: aggressive AI-driven innovation from rivals like Meta and OpenAI, and a stock price that appears overvalued relative to its peers. Add to this a culture seemingly resistant to disruptive change, and the case for caution—or even a sell—becomes compelling.

The AI Arms Race: Apple's Hardware Model Under Siege

Apple's dominance has long relied on premium hardware, from iPhones to AirPods. But competitors are now embedding AI into wearables and devices, eroding Apple's edge.

Meta's Playbook:
Meta's Ray-Ban Meta Glasses, which use its Llama AI to deliver spoken answers, have sold over 2 million units. Meanwhile, its partnership with Warby Parker and Google aims to create AI-powered glasses that could replace iPhones as the primary user interface. Meta's $300 billion tech industry spending in 2025—much of it on AI and cloud infrastructure—directly challenges Apple's conservative capital allocation ($9.5 billion in 2024).

OpenAI's Hardware Ambitions:
The acquisition of Jony Ive's startup io for $6.4 billion signals OpenAI's intent to build AI-native hardware. Ive's design expertise could produce devices that rival Apple's premium aesthetic but with advanced AI integration. OpenAI's focus on “frontier models” (requiring massive GPU clusters) also contrasts with Apple's reliance on rented cloud infrastructure, risking a gap in cutting-edge AI capabilities.

Apple's Apple Intelligence initiative has struggled, with delayed features like “More personal Siri” sparking class-action lawsuits. Competitors are advancing faster, leaving Apple to play catch-up.

Overvaluation: High Multiples, Bearish Technicals

Apple's valuation metrics now look stretched compared to peers.

• P/E Ratios: Apple's trailing P/E of 33.22 is higher than Meta (22.88), Microsoft (31.55), and Amazon (34.18). Its forward P/E of 25.52 still lags behind peers' growth trajectories.
• Death Cross Reality: Apple's stock formed a death cross in April 2025 when its 50-day moving average fell below its 200-day average. As of June, the stock trades at $202.67, well below its 200-day SMA of $224.39, signaling a prolonged bearish trend. Historically, this signal has proven detrimental. A backtest from 2020 to 2025 showed that buying on a Death Cross and holding for 60 days resulted in an average loss of 34.77%, with a maximum drawdown of 44.29%, underscoring the risks of relying on this indicator alone.

Analysts' “Moderate Buy” ratings ignore these risks. The stock's 19% drop over three days in April—the worst performance among the “Magnificent Seven”—hints at investor skepticism.

Cultural Complacency: A Silicon Valley Giant Stuck in the Past

Apple's slow AI adoption isn't just about resources; it's cultural. The company's reverence for hardware and its “closed ecosystem” mindset have stifled software innovation.

• AI Integration Lag: While Google's Gemini and OpenAI's ChatGPT push the envelope, Apple's AI remains siloed. Its M-series chips excel at inference but lack the GPU clusters needed for training frontier models.
• Strategic Myopia: Apple's $133 billion cash pile could fund acquisitions (e.g., Anthropic or Perplexity) to leapfrog rivals. Yet it hesitates, preferring incremental improvements. Meanwhile, discussions to integrate third-party AI (like Gemini) face regulatory hurdles tied to its OpenAI partnership.

The “More personal Siri” fiasco underscores a pattern: overpromising, underdelivering, and legal fallout. This isn't the Apple of 2007, which disrupted industries—it's a company clinging to legacy strengths.

Investment Takeaway: Sell Apple Until AI Catalysts Materialize

The risks outweigh the rewards here:
1. Competitive Threats: Meta and OpenAI are redefining the hardware-AI nexus, and Apple lacks a clear response.
2. Valuation Concerns: Over 30x P/E for a company with slowing growth and technical headwinds is risky. The Death Cross's historical underperformance further weakens the case for holding.
3. Execution Risks: Cultural resistance to disruption may delay meaningful AI breakthroughs.

Action: Trim exposure to AAPL. Wait for catalysts like a blockbuster AI acquisition, a breakthrough in hardware-software integration, or a sustained rebound above $225. Until then, the risks of overvaluation and competitive erosion are too great.

In the AI era, Apple's crown is no longer safe. Investors would be wise to look elsewhere for tech growth.