Apple shares cratered nearly 10% on Friday, putting the stock on track for its worst single-day performance since the pandemic-fueled panic of March 2020. The selloff, triggered by a stark warning over AI-driven component shortages, vaporized roughly $500 billion in market capitalization and handed the crown of the world’s most valuable company back to chip titan Nvidia.
A Supply Chain Legend’s Stark Warning
The rout followed a disappointing forecast that revealed the iPhone maker is struggling to secure enough advanced components. The global race to build out artificial intelligence data centers has ignited a feeding frenzy for cutting-edge chips and high-bandwidth memory, straining supply lines and driving up costs across the tech industry.
Tim Cook, long celebrated as a supply-chain virtuoso, described the shortages as “very significant” and conceded the company has limited options to navigate them. The candid assessment came during his final earnings call as chief executive before transitioning to the role of executive chairman in September, with John Ternus set to take the helm.
“If even at Apple’s scale they are saying they are out of all supply chain flexibility, it’s really bad for everyone,” said Ben Bajarin, CEO of tech consultancy Creative Strategies.
The AI Boom’s Collateral Damage
Big Tech’s insatiable appetite for AI infrastructure is consuming vast quantities of advanced manufacturing capacity. This dynamic is sparking shortages and price hikes that are now expected to shrink both the personal computer and smartphone markets this year. Apple had previously cushioned the blow of surging memory costs by depleting its stockpiled inventory, but Cook warned that buffer is now fading. Processor shortages, he added, are preventing the company from fully capitalizing on robust demand for iPhones and Macs.
The company’s forecast for revenue growth between 9% and 11% in the current quarter missed Wall Street’s expectation of roughly 12%. While June-quarter results were otherwise strong, softer growth in the high-margin services business intensified the negative reaction.
Services Weakness Deepens Investor Anxiety
The slowdown in services is particularly alarming for investors because it occurred during a period of strong iPhone sales, which typically act as a feeder system for the segment. The services division takes a cut of App Store purchases and encompasses offerings from Apple Music to Apple TV.
Concerns are mounting that a potential price increase on the upcoming iPhone lineup, typically unveiled in September, could further depress hardware sales and, by extension, the services ecosystem.
“Apple’s leverage over the supply chain appears to be in question and it’s not clear that AI is serving as any measurable tailwind to products or services, with its future monetization impact still uncertain,” Morgan Stanley analysts wrote in a note. “In fact, one could argue App Store softness might even be a result of AI re-prioritizing customer time.”
A Silver Lining for Consumer Spending?
Despite the gloom, some analysts maintain that the iPhone has historically weathered price hikes without significant demand destruction. They also point to a recent U.S. leasing partnership with Klarna, which offers monthly payment plans for Apple devices, as a potential buffer that could soften the impact of higher sticker prices on consumers.
In the wake of the forecast, at least four brokerages slashed their price targets on Apple stock, while three raised their outlooks. According to LSEG data, the median analyst target now sits at $330, slightly below the last closing price. Even with Friday’s plunge, the stock had risen 22.7% this year as of Thursday’s close, highlighting the sudden and brutal nature of the market’s reappraisal.
