June 13 - Apple (AAPL, Financial) may risk falling behind in AI after a muted showing at WWDC, according to analysts. Investor reaction was tepid, with shares dipping modestly last week as expectations around “Apple Intelligence” went unmet.
Unlike peers such as Tesla (TSLA, Financial), Meta Platforms (META, Financial), Amazon (AMZN, Financial) and Google (GOOG), Apple has not signalled large-scale AI infrastructure investments. The recent iPhone upgrade cycle appears subdued: iPhone revenue was about $46.8 billion in the latest quarter, roughly 2% higher year on year, suggesting limited upside from incremental AI features.
Apple's Services segment faces fresh headwinds after losing an appeal in the Epic Games App Store case, which may pressure commission revenues. Wearables also saw softer growth despite Vision Pro contributions, highlighting potential challenges in key growth areas.
Valuation remains rich: Apple trades at about 27.6 times expected earnings for the current fiscal year and around 25.3 times for next year, while peers carry lower multiples with stronger EPS momentum. Buybacks may have less impact at these levels.
Investors are likely to monitor whether Apple ramps AI spending to catch up or relies on its ecosystem to monetize future services. With other big tech doubling down on AI, Apple's ability to pivot may be critical for sustaining growth and justifying its premium valuation.
