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Apple's Struggles in China and AI Lag: Can Tim Cook Show Bold Leadership?

Stock SpotlightWednesday, Jan 29, 2025 6:05 am ET

1min read

As we enter 2025, Apple is undoubtedly the most challenged among the Magnificent Seven. Despite being the world's most valuable stock, Apple has already dropped 11% this year, with its crown constantly threatened by Nvidia and Microsoft. Weak iPhone sales in China and a lagging AI strategy have weighed heavily on the company.

Apple's Market Share Plunge in China

According to the latest data from Counterpoint, domestic Chinese smartphone brands have surged in Q4 2024, while Apple has lost ground. Huawei and Xiaomi have overtaken Apple in market share, with Vivo also catching up. Just a year ago, in Q4 2023, Apple dominated the Chinese market with a 20% share, far ahead of competitors. However, within a year, Apple has lost 18 percentage points in market share.

The reasons are clear. The iPhone 16's lackluster innovation, Apple AI failing to meet expectations, and delays in launching AI services in China have all weakened consumer interest in upgrading. Apple has long relied on past successes, but consumers are no longer willing to tolerate incremental improvements.

Criticism Mounts: Is Apple Still Innovating?

Apple's struggles are not limited to China. Even in the U.S., consumers and industry leaders are voicing frustration over the company's slow innovation. Mark Zuckerberg recently criticized Apple directly, stating that since the launch of the iPhone, Apple has failed to introduce another groundbreaking product and has merely been living off past glory.

Renowned Apple analyst Ming-Chi Kuo has warned that Apple will face even greater challenges this year, including stagnating iPhone growth, an AI strategy that has yet to make a meaningful contribution, and ongoing declines in China. Meanwhile, Jefferies analyst Edison Lee recently downgraded Apple from "Hold" to "Underperform," cutting the price target from $211 to $200.75.

With the upcoming earnings report, Tim Cook must demonstrate bold leadership and prove that Apple still has the product strength to win over consumers.

A Key Focus: Apple's Software Revenue

Another critical issue to watch is Apple's software revenue. With increasing regulatory pressure, the App Store is gradually opening up to sideloading in various countries. How much will this impact Apple's software service revenue? Additionally, as Apple faces headwinds in China and its active user base declines, can its services business continue its steady growth?

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