Apple is going to lose almost $500 billion in value because of a bad forecast
Apple shares dropped almost 10% on Friday after a bad forecast showed that the company was having trouble getting enough parts because of the AI-driven boom in data centers, which is putting pressure on global supply chains.
If the drop lasts, it will be the worst day for the stock since the selloff caused by the pandemic in March 2020. It would take away almost $500 billion from Apple’s market value and give the title of world’s most valuable company back to Nvidia, just days after Apple took it back.
Many people think Tim Cook is a supply-chain genius. On his last earnings call as CEO before becoming executive chairman and handing over the reins to John Ternus in September, he called the shortages “very significant” and said Apple didn’t have many options to deal with them. “If even at Apple’s scale they are saying they are out of all supply chain flexibility, it’s really bad for everyone,” said Ben Bajarin, CEO of tech consulting firm Creative Strategies.
Big Tech has been buying up advanced chip-making capacity and memory chips to power its AI data centers. This has caused gaps and price hikes that are expected to hurt both the PC and smartphone markets this year.
Apple had been able to handle some of the impact of rising memory costs by using stored goods, but Cook said that the buffer was running out and that Apple couldn’t meet the high demand for iPhones and Macs due to a lack of processors.
It said on Thursday that it expected revenue to grow between 9% and 11% this quarter, which was less than Wall Street’s estimate of about 12%. Weaker growth in its services business also overshadowed otherwise strong June-quarter results.
INVESTORS WORRY ABOUT WEAK SERVICES
People were worried about the services because they were weak during a time of strong iPhone sales. iPhone sales usually help the business that takes a cut of App Store purchases and includes Apple Music, Apple TV, and more.
That slowdown could get worse if iPhone sales drop because of a price hike that many analysts think will happen when the new lineup comes out 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 said. “In fact, one could argue App Store softness might even be a result of AI re-prioritizing customer time.”
Still, some experts said that the iPhone has been through price increases before without a big drop in demand and that Apple’s new U.S. leasing deal with Klarna that offers monthly plans for its devices could lessen the blow.
The stock price goals of at least four brokerages went down, while those of three brokerages went up. LSEG data shows that this made the median view drop to $330, which is $3 less than the last ending price. As of Thursday night, the stock had gone up 22.7% for the year.
