Apple's Tumultuous Tumble: How Geopolitics and AI Competition Rock the Tech Giant

Apple has recently found itself at the center of attention as President Trump repeatedly criticizes the company's manufacturing decisions. This has put pressure on Apple's stock, causing it to trail behind other major tech companies over the past month. Once the largest publicly traded company globally at the beginning of May, Apple has now fallen to third place behind Microsoft and Nvidia.

On May 22, Apple's stock fell by 0.36%, closing at $201.36 per share and resulting in a marginal market cap above $3 trillion. The stock struggled again, experiencing a drop of 2.31% following news that OpenAI acquired the startup founded by former Apple design head Jony Ive, aiming to develop AI-centric hardware. This acquisition raises concerns that new AI hardware could challenge Apple's product dominance, further exacerbating its position in the AI race.

Trump's focus on Apple's manufacturing footprint globally poses additional risks. Earlier this month, he expressed dissatisfaction with Tim Cook, demanding that Apple cease its manufacturing operations in India. Randy Hare, head of equity research at Huntington Bank, stated that Trump's persistent mentions of Apple serve as a warning sign, noting Trump's unpredictable nature.

Apple's fate is closely tied to trade tensions, having previously experienced stock volatility due to announcements of reciprocal tariffs. While the company initially faced declines, it later rebounded following exemptions on key electronics imports from tariffs. During a forum appearance last week, Trump praised Nvidia's CEO, contrasting him with Cook's absence, indicating potential favoritism toward certain tech leaders.

In light of these circumstances, Lamar Villere of Villere & Co. cautioned against overstating market fears over Trump’s threats, noting a potential investor immunity to such discussions. He argued that penalties against Apple for offshore manufacturing are unlikely, nor is legislation targeting a specific company expected. Addressing Trump's concerns about Apple's overseas expansion is challenging, especially when large-scale domestic production remains impractical.

Despite geopolitical risks stemming from Trump's policies, Apple grapples with other challenges. Recent financial reports heighten concerns over its performance slowdown. Following the earnings release, two institutions downgraded Apple, reinforcing its less favorable reputation among large tech stocks. Apple also faces investor reluctance due to issues like stagnant growth and high valuations, with a price-to-earnings ratio significantly above historical averages.

Randy Hare pointed out foundational issues beyond politics, expressing uncertainty over Apple's entry into AI and innovation, making investment decisions difficult. The company’s growth has slowed while its valuation remains high, suggesting prudent portfolio adjustments irrespective of political risk considerations.