Apple shares fell almost 10% on Friday after the company gave a weak outlook. The forecast showed Apple shares struggling to get enough parts as the AI data center boom strains supply chains worldwide.
If the drop holds, it would be Apple’s worst single day since the pandemic selloff in March 2020. The company would lose close to $500 billion in market value. It would also lose its title as the world’s most valuable company to AI chip maker Nvidia, just days after taking that spot back.
Tim Cook called the shortages “very significant.” He said Apple has few options left to fix them. This was Cook’s last earnings call as CEO. He steps down in September, becoming executive chairman, while John Ternus takes over as CEO.
Ben Bajarin, CEO of Creative Strategies, said that if even Apple is running out of supply-chain solutions, it is a negative sign for the whole industry.
Big tech companies have been buying up advanced chip-making capacity and memory chips for their AI data centers. This has caused shortages and higher prices, which are expected to hurt both the smartphone and PC markets this year.
Apple had used its stockpiled inventory to soften the blow from rising memory costs. But Cook said that buffer is running low. Processor shortages are now stopping Apple from meeting strong demand for iPhones and Macs.
Apple forecast revenue growth of 9% to 11% for the current quarter. That fell short of Wall Street’s estimate of about 12%. Slower growth in its services business also overshadowed otherwise strong results for the June quarter.
Slow services worried investors
The services slowdown worried investors because it happened during a period of strong iPhone sales. Normally, strong iPhone sales boost the services business, which includes App Store purchases, Apple Music, and Apple TV.
The slowdown may deepen if Apple raises iPhone prices, as many expect, when the new lineup launches in September.
Morgan Stanley, an merican global financial services company said Apple’s grip on its supply chain now looks shaky. They also said AI is not clearly helping Apple’s products or services yet, and its future financial impact remains uncertain. They suggested weak app store sales could partly be because people are spending more time using AI tools instead.
However, some companies noted that iPhone demand has held up before despite price hikes. They also pointed to a new U.S. leasing deal with Klarna, which offers monthly payment plans for Apple devices, as something that could ease the pressure.
At least four brokerages lowered their price targets for Apple stock, while three raised theirs. That pushed the median target to $330-$3 below Thursday’s closing price, according to LSEG data. Even with the drop, Apple’s stock is still up 22.7% for the year as of Thursday’s close.
Read more: Apple’s anniversary iPhone leaks reveal major redesign
