It was an overwhelming week for Apple, to say the least, as the iPhone maker saw its fortunes whipsaw throughout the week—becoming the world’s most valuable company, briefly exceeding the $5 trillion market capitalization mark, and then suffering one of the biggest single-day declines in its history after issuing a cautious outlook.
Investors had increasingly been viewing Apple as a safe harbour amid mounting uncertainty surrounding artificial intelligence spending.
While rivals such as Microsoft, Amazon, Alphabet, and Meta have poured hundreds of billions of dollars into AI infrastructure, Apple largely avoided the capital-intensive race by relying on partners such as Google to power new AI features.
That positioning helped Apple’s shares outperform much of Big Tech this year.
However, the company’s latest earnings report showed that Apple is not immune to the ripple effects of the AI boom.
Shares fell nearly 10% on Friday after management forecast slower-than-expected revenue growth for the current quarter and warned that shortages of key components were limiting its ability to meet demand.
Softer-than-expected services revenue and weaker sales in Greater China added to investor concerns.
The selloff threatened to erase nearly $500 billion in market value, marking Apple’s worst one-day decline since the pandemic-driven market crash in March 2020 and handing the title of the world’s most valuable company back to Nvidia.
From market leader to market loser in five days
The week had begun on a very different note.
On Monday, Apple overtook Nvidia to reclaim the position of the world’s most valuable listed company for the first time since April 2025.
Nvidia’s shares dropped 5% as investors questioned whether hyperscalers’ enormous AI spending would ultimately generate sufficient returns.
The decline reduced Nvidia’s valuation to $4.77 trillion.
Apple, meanwhile, gained 1%, lifting its market capitalization to $4.95 trillion.
A day later, the optimism intensified as Apple’s market value briefly crossed the $5 trillion milestone, making it only the second company, after Nvidia to achieve the feat.
The company had benefited from strong demand for its products and, more importantly, from investor preference for businesses that were not directly exposed to the soaring costs of building AI infrastructure.
Apple shares had climbed roughly 25% this year before earnings, comfortably outperforming several members of the so-called Magnificent Seven.
“There’s a battle in the market, and right now Apple is benefiting because it isn’t in the storm that the rest of the AI trade is in,” Mark Bronzo, chief investment strategist at Rye Strategic Partners, told Bloomberg earlier this month.
“People are concerned about what kind of return hyperscalers could get from their AI spending, and there are also arguments that semis have gotten ahead of themselves. As a result, investors have gravitated back to Apple as a steady-eddy name without those risks.”
Apple’s strategy has been notably different from its peers.
Rather than building massive AI computing infrastructure, the company has leaned on Google’s AI models to power new products such as its upgraded Siri assistant, allowing it to avoid much of the capital expenditure weighing on other technology companies.
Earnings beat expectations but guidance disappoints
The quarterly numbers themselves painted a healthy picture.
Revenue for Apple’s fiscal third quarter ended June 27 rose 16.4% to $109.42 billion, ahead of analysts’ expectations for 15.5% growth, according to LSEG.
Adjusted earnings also topped forecasts.
The company reported profit of $2.02 per share, including 11 cents from US government tariff refunds.
Even excluding those refunds, earnings exceeded Wall Street estimates of $1.89 per share.
Driving the performance was another standout quarter for the iPhone.
Sales of Apple’s flagship device climbed 21.7% to $54.25 billion, beating expectations of $53.86 billion and marking the strongest third-quarter iPhone performance in the company’s history.
The results reflected continued consumer demand even as smartphone prices increased across the industry.
Yet investors quickly looked beyond the headline figures.
Apple’s services business, widely viewed as its highest-margin growth engine, generated $30.74 billion in revenue, up 12.1% but below expectations of $31.22 billion.
DA Davidson analyst Gil Luria said investors were increasingly concerned about that slowdown.
“Investors are concerned that if services are decelerating while iPhone is growing more than 20%, it may slow down even more as iPhone sales come back down to earth,” he said.
The bigger disappointment came from management’s outlook.
Apple forecast September-quarter revenue growth of between 9% and 11%, below Wall Street expectations of roughly 12%.
That guidance suggested supply constraints—not demand—were becoming the company’s biggest challenge.
AI boom creates new supply-chain headaches
Apple acknowledged that cost pressures and component shortages would weigh on profitability over the coming months.
The company projected gross margins of between 47% and 48% for the September quarter, compared with roughly 50% in the June quarter.
Although tariff refunds will continue to provide about one percentage point of support, that benefit is smaller than in the previous quarter.
Chief Executive Tim Cook acknowledged that supply-chain flexibility had largely disappeared.
“We’re seeing some very significant constraints currently with limited flexibility in the supply chain to remedy it,” Cook said during the earnings call.
The comments surprised investors because Cook has long been regarded as one of the industry’s foremost supply-chain managers.
Speaking on his final earnings call as chief executive before handing leadership to John Ternus in September and moving into the role of executive chairman, Cook described the shortages as unusually severe.
The constraints stem largely from the AI investment boom sweeping across Big Tech.
Cloud providers have aggressively secured advanced semiconductor manufacturing capacity and high-bandwidth memory chips to power AI data centres, driving up prices and limiting availability for other industries.
“If even at Apple’s scale they are saying they are out all supply chain flexibility, it’s really bad for everyone,” Ben Bajarin, CEO of technology consultancy Creative Strategies, told Reuters.
Apple had previously softened the impact of rising memory prices by drawing down inventory accumulated earlier.
Cook indicated that buffer was now running out.
He said shortages of processors were preventing Apple from fully meeting demand for iPhones and Macs despite robust consumer appetite.
Investors now focus on what comes next
Analysts say the company’s near-term outlook now hinges on whether current demand reflects sustainable growth or merely customers rushing to buy devices before anticipated price increases.
This year, consumers accelerated purchases as memory shortages pushed Apple to increase prices for Macs and iPads.
The company has so far avoided raising iPhone prices, though many analysts expect changes around September’s product launch.
Evercore ISI analyst Amit Daryanani said investors were likely to focus on Apple’s margins over the coming quarters, although he believes management’s outlook could ultimately prove conservative.
Bob O’Donnell, chief analyst at TECHnalysis Research, said in a Reuters report that markets were questioning whether recent demand represented a temporary surge.
“I do think it’s possible people are going to continue to buy the existing phones, because of the price increases,” he said.
“The big question is, what’s going to happen on Macs in this quarter, when the new prices are fully there?”
Despite Friday’s sharp decline, Apple’s stock remains up about 11% this year, outperforming companies such as Meta, whose shares have fallen 16%, and Tesla, which is down nearly 30%.
Microsoft, Amazon and Alphabet have all recovered strongly following their earnings reports, though investors remain focused on whether the AI investment cycle can continue generating sufficient returns.
Apple’s turbulent week suggests that even companies sitting outside the centre of the AI spending race are increasingly being pulled into its orbit.
The company may have avoided the massive infrastructure bills weighing on its rivals, but it can no longer escape the supply-chain strains those investments have created.
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