Jefferies published a research note, downgrading Apple (AAPL.US) to "Hold" from "Buy" with a target price of $205, citing "overly high" expectations for the iPhone. As of writing, the stock was down about 1% before the opening of the U.S. stock market on Monday.Analyst Edison Lee wrote in a note to clients: "We remain bullish on Apple Intelligence as the only hardware-software integration company that can leverage proprietary data to provide low-cost, personalized artificial intelligence services. However, the smartphone hardware needs to be redesigned to achieve true artificial intelligence, which may be in 2026/27. In our view, the high expectations for iPhone 16/17 are premature."Lee added that the expectation of 5% to 10% growth in iPhone sales "is unlikely to materialize" due to "lack of meaningful new features and limited AI coverage." Therefore, he believes the growth rate for the iPhone 16 cycle is only 2.5%.Despite this, Apple's long-term AI capabilities are promising, partly due to its collaboration with OpenAI and its OpenELM large language model, which is believed to consume only 1.56GB of RAM. Its other model, Ferret UI, focuses on understanding the user's phone screen.Lee added: "We believe Apple is the leader in AI technology in the mobile space, with its chip-operating system-AI integration ecosystem far ahead of the fragmented Android competition."