Investment firm Jefferies downgraded Apple stock to “underperform” on Monday, citing the cancellation of a rumored all-glass iPhone, rising memory costs, and sluggish progress in artificial intelligence.
Supply Chain Woes and the End of the All-Glass Dream
Jefferies analysts slashed their price target for Apple from $285.56 to $263.66 after supply chain checks revealed that the company has scrapped plans for an all-glass iPhone, which was originally slated for the device’s 20th anniversary next year. Analysts noted that this move highlights the growing difficulty Apple faces in introducing new form factors to drive higher average selling prices (ASP).
With the all-glass project dead, the focus shifts to Apple’s anticipated foldable phone. Expected to be unveiled next month, the device is now the company’s primary margin driver. However, analysts warn that surging memory costs could push the price tag to $2,199 for the 256GB model and a staggering $3,099 for the 2TB version.
Wall Street Sentiment Hits Post-Jobs Low
The downgrade marks a significant shift in market confidence. According to Bloomberg, at least six firms have now issued “sell” ratings on Apple, a level of pessimism not seen since 2012, shortly after the death of Steve Jobs. This follows a trend set in July, when KeyBanc Capital Markets lowered its valuation of the company due to softening iPhone demand.
Apple shares have been under pressure since late July, when the company projected that iPhone sales—which represent roughly half of its total business—would see “mid-teens” growth this quarter. This represents a sharp deceleration from the 22% growth reported in the previous quarter, with management warning of shrinking gross profit margins.
Leadership Transition and the Memory Crisis
These setbacks arrive as John Ternus prepares to succeed Tim Cook as CEO next month. Ternus takes the helm during a critical period, with investors scrutinizing the company’s AI strategy and questioning if he can restore Apple’s reputation for innovative product design.
Compounding these operational hurdles is the volatile memory chip market. The global shortage, driven by massive data center demand for AI infrastructure, has forced Apple to hike prices across its Mac and iPad lineups. Apple currently relies on a limited pool of suppliers—Micron, SK Hynix, and Samsung—to source DRAM chips.
In a potential effort to mitigate these costs, reports suggest Apple is testing memory chips from China’s CXMT. Such a move could invite scrutiny and potential objections from the White House if the partnership moves forward.
The AI Strategy
Despite these headwinds, Apple remains committed to its “on-device” AI approach. Tim Cook has emphasized that running AI directly on hardware is a strategic competitive advantage, specifically catering to privacy-conscious users. “The ability to run some percentage of requests on-device is also very strategic, sort of a competitive weapon if you will,” Cook stated last month.