Apple Inc.'s anti-artificial intelligence position has become a liability as the stock has fallen 10% since closing at a record high on July 28, following disappointing earnings results. According to reports from Business Standard, the iPhone maker's shares are among the 25 worst performing stocks in the S&P 500 Index over the past three weeks, while the broader technology sector has surged. The Nasdaq 100 Index is up 8% over that period, and the Philadelphia Stock Exchange Semiconductor Index (SOX) has advanced 14%, demonstrating a stark reversal from July when Apple shares rose 6.8% while the Nasdaq 100 fell 6.6%. This represents a significant shift from the previous month when the semiconductor index plunged 21% for its worst month since 2008 as investors questioned how much longer massive AI spending would continue.
Jefferies has downgraded Apple stock to 'Underperform' after supply chain checks indicated the special all-glass iPhone, expected for the company's 20th anniversary in 2027, has been cancelled due to low yield. The downgrade follows Jefferies' supply chain checks, which indicated that the all-glass iPhone has been cancelled due to low yield, marking a significant setback for Apple's plans to introduce higher-priced models amidst rising memory costs. Jefferies set a new price target at $263.66, which is 16% lower than the previous target of $285.56. Currently, AAPL stock price is around $306, after jumping over 32% in the last 12 months and 12% so far in 2026. In the last month, AAPL has been under pressure, falling 6% during the period as against 4.8% returns in Nasdaq-100.
The cancellation of the special all-glass iPhone will significantly impact Apple's pricing strategy and profitability. Jefferies estimates that the cancellation is expected to lower the compound annual growth rate (CAGR) of iPhone average selling prices (ASP) from 9.0% to 6.8% between FY26 and FY31. The cancelled phone was supposed to sell at a high price of $2,060 and set the stage for future Pro models to also cost more. Without this flagship product, Apple loses a key way to raise prices and profit margins. The company announced a nearly 20% price hike for its Mac and iPad products on June 25, but not for iPhone yet, and Apple will likely struggle to balance volume and margin in the next 18 months, according to Jefferies.
The stock's decline coincides with renewed investor interest in artificial intelligence companies following strong earnings from major technology players. As reported by Business Standard, investors have rotated back into perceived AI winners as results from Microsoft Corp., Amazon.com Inc., and Alphabet Inc. have assuaged fears about overspending on the technology. Jordan McCall, senior portfolio manager at Russell Investments with $418 billion in assets, noted that while July was characterized by concern over capital expenditure, the latest earnings results have clearly allayed some of that angst, leading to this rotation. "There's been this ebb and flow of angst and enthusiasm over capex all year, and while July was all about concern over capex, the latest earnings results clearly allayed some of that angst, leading to this rotation," McCall explained. "I expect the see-saw to continue now that there's more comfort with spending, and as Apple remains a different expression of the AI capital cycle."
Apple's strategy of avoiding the costly arms race for computing infrastructure is now directly hurting the company through increased component costs. According to Business Standard reports, memory chip prices, which are estimated to represent 10% to 20% of the cost of building a smartphone, have soared amid insatiable demand from data centers. The flood of money into computing infrastructure is driving up the cost of components used in Apple's devices and making them scarce, with prices expected to remain elevated for an extended period. This cost inflation is particularly concerning as Apple prepares to unveil a foldable iPhone next month, with analyst Edison Lee noting that "memory prices will result in a higher costing product, and we still believe such an expensive phone would be a niche product." The iPhone 18 Fold is now expected to be the main contributor to higher ASP and margins, with estimated retail prices of $2,199 for the 256GB model and $3,099 for the 2TB version. Jefferies expects only 14 million units in sales forecasts for FY28 for the iPhone 18 Fold, which suggests it will remain a niche product.
