Investors are hopeful that cheaper AI models could lead to increased app innovation and AI adoption, which might eventually boost Apple's growth. However, the company has not heavily invested in AI infrastructure compared to its peers, and the anticipated AI-driven growth has yet to materialize. While some investors remain optimistic about Apple's long-term prospects, the current high valuation is difficult to justify without significant AI-driven growth.
Key takeaways:
- Apple's AI prospects are being revitalized by the emergence of Chinese AI startup DeepSeek, which offers cheaper AI models that could drive an iPhone upgrade cycle.
- Despite recent stock gains, Apple has been downgraded by several firms due to concerns over iPhone weakness and high valuation, making it one of the least-loved megacaps besides Tesla.
- Apple's revenue growth has been negative in five of the past eight quarters, and its high valuation is under scrutiny as AI hasn't yet translated to significant growth.
- While optimism exists around AI developments, analysts have not increased their estimates for Apple's 2025 revenue and net earnings, though the company remains a stable investment with strong quality characteristics.