Apple (AAPL -3%) is experiencing a drop today after preorders for its newest iPhone models fell short of expectations. Last week, Apple introduced the iPhone 16, iPhone 16 Pro, and iPhone 16 Pro Max with minimal design changes. The company also unveiled its latest Apple Watch and AirPods, part of its Wearables segment.
Apple's annual events, like the Worldwide Developers Conference, often trigger a sell-the-news reaction. Typically, the stock rebounds quickly. For instance, shares dipped in June after the iOS 18 announcement but later surged to all-time highs due to excitement over AI features.
This time, however, the scenario is somewhat different.
- Many AI features in iOS 18 are exclusive to the current iPhone 15 Pro and upcoming iPhone 16 models. This exclusivity had investors and Apple suppliers hopeful for a demand resurgence.
- For example, Skyworks (SWKS, Financial) anticipated that AI would drive significant smartphone replacements. Similarly, Broadcom (AVGO, Financial) expected a 20% increase in wireless revenue in October, fueled by iPhone demand.
- However, some caution remains in the smartphone market regarding Apple's latest iPhones. Qorvo (QRVO, Financial), a major Apple supplier, did not forecast a significant jump in smartphone replacements. Verizon (VZ, Financial) noted that many customers already have recent iPhone models, which may slow upgrades. AT&T (T, Financial) also mentioned that it hasn't seen anything in AI devices that would cause a major shift in consumer behavior.
- Competition also plays a role. Samsung (SSNLF, Financial) has offered AI features in its handsets for over a year. Additionally, Huawei and other Android-powered devices, including Samsung's, offer more diverse designs like folding phones.
Economic conditions, including inflationary pressures, are causing consumers to hesitate on upgrades, leading to underperformance for Apple's newest iPhones. While demand may pick up over time, investors are currently skeptical about whether Apple Intelligence features will drive consumers to the latest models.
