Apple is facing a potential loss of nearly $500 billion in market value following a weaker-than-expected outlook, as its shares tumbled around 10% on Friday.
The decline came after the company warned that component shortages – driven by surging demand for AI infrastructure – are creating widespread supply constraints. If the losses hold, it would be the stock’s steepest single-day drop since the market turmoil of March 2020, and would push Apple behind Nvidia as the world’s most valuable publicly traded company, according to Reuters.
On what is expected to be his last earnings call as CEO before transitioning to executive chairman in September, Tim Cook described the supply difficulties as “very significant,” noting that the company has limited means to address them.
“If even at Apple’s scale they are saying they are out all supply chain flexibility, it’s really bad for everyone,” said Ben Bajarin, CEO of tech consultant Creative Strategies.
Major technology firms have been absorbing large quantities of advanced chips and memory components to support AI-driven data centres, leading to tighter supply and higher prices that are expected to shrink both the PC and smartphone markets this year.
Apple had managed to offset some of the impact from rising memory costs using stockpiled inventory, but Cook indicated those reserves are now depleted, and processor shortages continue to limit its ability to meet strong demand for iPhones and Macs.
The company projected revenue growth of 9% to 11% for the current quarter, below Wall Street’s expectations of around 12%. A slowdown in its services division also tempered an otherwise solid June-quarter performance.
The services weakness has unsettled investors, particularly as it comes during a period of strong iPhone sales, which typically fuel the services business by generating revenue from app-store purchases and subscriptions like Apple Music and Apple TV.
That slowdown could worsen if iPhone sales are affected by expected price hikes in the upcoming product launch cycle, generally announced in September.
“Apple’s leverage over the supply chain appears to be in question and it’s not clear that AI is serving as any measurable tailwind to products or services, with its future monetization impact still uncertain,” Morgan Stanley analysts wrote.
“In fact, one could argue App Store softness might even be a result of AI re-prioritizing customer time.”
Still, some analysts pointed out that the iPhone has previously weathered price increases without substantial demand loss. They also noted that a recent US leasing agreement with Klarna, offering instalment plans for Apple devices, could help soften the effect on consumers.
Following the results, at least four brokerages lowered their price targets for Apple, while three raised theirs, bringing the median view to $330, $3 below the stock’s last closing price. As of Thursday’s close, the shares had gained 22.7% this year.
