AI shortcomings and iPhone replacement cycle under pressure, Apple downgraded to "Hold" rating by Needham
Needham downgraded Apple's rating from "Buy" to "Hold," with analysts pointing out risks such as intensified competition, slowing growth, and high valuations. Apple's stock price fell 0.4% in pre-market trading on Wednesday, with a cumulative decline of 19% for the year. Currently, less than 60% of analysts maintain a "Buy" recommendation, far lower than other large tech stocks. Analysts also mentioned that the extended iPhone upgrade cycle and competitive disadvantages in the AI field could threaten Apple's market position
According to Zhitong Finance APP, Apple Inc. (AAPL.US) stock price fell 0.4% in pre-market trading on Wednesday, continuing its weak performance since 2025. As of June 4th pre-market trading, the tech giant has seen a cumulative decline of 19% this year, making it the weakest performer among the "seven giants" of U.S. stocks. Needham has recently joined the bearish camp, downgrading Apple's rating from "Buy" to "Hold." Analyst Laura Martin pointed out that the company faces multiple risks, including intensified competition, slowing growth, and high valuations.
In fact, Needham is not the only company that has lost confidence in Apple. In May of this year, Jefferies and Rosenblatt Securities downgraded Apple's stock rating, while Oppenheimer, MoffettNathanson, Loop Capital, Aletheia Capital, and DBS Bank also downgraded Apple's rating at the beginning of 2025.
Data shows that currently, less than 60% of analysts maintain a "Buy" recommendation, the lowest among large tech stocks, far below the over 90% buy ratings for competitors like Microsoft (MSFT.US), Amazon (AMZN.US), Nvidia (NVDA.US), and Meta (META.US).
Needham emphasized in its research report that deeper concerns about Apple come from a strategic level: first, the smartphone market's growth rate is slowing, and the iPhone replacement cycle is extending. Analyst Martin bluntly stated that "a replacement wave is unlikely to occur in the next 12 months"; second, there is a competitive disadvantage in the field of artificial intelligence, and insufficient innovation in generative AI may threaten its dominant position in the hardware ecosystem. OpenAI's acquisition of the startup co-founded by legendary designer Jony Ive further highlights Apple's lag in AI hardware layout.
Additionally, to cope with trade risks, Apple is accelerating supply chain diversification, but in the short term, it still heavily relies on Chinese manufacturing. The uncertainty of tariffs combined with intensified competition in the Chinese market has put pressure on its iPhone business. Meanwhile, the company is attempting to break through by diversifying its service business, but the expansion of high-margin businesses like advertising still requires time for validation.
If Apple wants to regain investor favor, it needs to achieve breakthroughs in two areas: first, accelerate the commercialization of AI technology, and second, launch disruptive new product forms. However, against the backdrop of overall weak consumer electronics demand, achieving these two goals is not to be underestimated
