As Apple heads into its annual developers conference this coming week, it is facing a slew of problems that has led to a stock price slide of 20% this year thus far, the worst performance since at least 2010.
Expected to dominate headlines at Apple’s WWDC, or Worldwide Developers Conference, is how far it lags its rivals in artificial intelligence (AI), according to The Wall Street Journal (WSJ).
While competitors like Microsoft and Google have used their own developer events to highlight rapid progress in AI, Apple’s event might underscore how far it still has to go in AI.
Siri is long overdue for an AI revamp. Apple itself admitted recently that the upgrade is taking longer than anticipated.
“Apple will be much more cautious about overpromising and will refrain from showing features that aren’t yet ready for prime time,” said Craig Moffett of research firm MoffettNathanson, according to the WSJ.
More Outside Pressures
However, AI is just one concern among several. The company is also facing tariffs that threaten its hardware profit margins. President Donald Trump also is pressuring Apple to change its overseas production model — a supply chain strategy the company has used for two decades.
Meanwhile, the company’s services division, which delivers gross profit margins of 74%, is under legal scrutiny. Questions surround both App Store fees and payments Apple gets from Google for being its default search engine.
“We caution that Apple has material risks to its revenue growth, margins and valuation multiple,” Needham analyst Laura Martin wrote in a report, downgrading the stock to “hold.”
Unlike rivals Amazon, Microsoft and Google, which are monetizing AI tools, Apple isn’t charging for its generative AI features. This strategy could limit near-term upside as it tries to boost sales of core hardware, especially iPhones, which have seen flat revenue for two years.
“We believe that, for this stock to work, it must have the catalyst of an iPhone replacement cycle, which we do not foresee in the next 12 months,” Martin added.
Adding to the tension is competition from an unexpected place: OpenAI has teamed up with former Apple designer Jony Ive to develop “AI companions,” a potential new class of devices that could disrupt the smartphone-dominated landscape Apple helped create.
Despite a loyal user base of 2.35 billion active devices, Apple’s dominance faces serious headwinds. Its AI delay is notable — but compared to the external risks of tariffs, legal battles and OpenAI’s new devices, this may be the only problem the company still fully controls, the WSJ said.
Source: https://www.pymnts.com/
