Key Takeaways
- Apple shares have declined 5% since the start of the year, making it the only Magnificent Seven stock in the red for the year.
- The iPhone maker has struggled to roll out artificial intelligence features, leading Wall Street to debate whether the company should make an uncharacteristically large acquisition to close the gap with big tech peers that have gone all in on AI.
- Low expectations heading into this year’s iPhone upgrade cycle could boost the stock in the near term, according to Morgan Stanley analyst Erik Woodring.
The Magnificent Seven is living up to its name this year, with one glaring exception.
Apple (AAPL) shares have stalled out, with the iPhone maker’s stock down 5% in 2025 as of Tuesday’s close. Tesla (TSLA) and Amazon (AMZN), the Mag 7’s next-worst performers, are up single digits, and the remainder of the group—Microsoft (MSFT), Nvidia (NVDA), Alphabet (GOOGL) and Meta Platforms (META)—has gained between 20% and 33%. The Roundhill Magnificent Seven ETF (MAGS) is up 18% for the year, compared with the S&P 500’s 12% gain.
Artificial intelligence, the technology that’s sent so many stocks soaring, is the main reason Apple has struggled. The consensus on Wall Street is that Apple was slow out of the gate in the AI race, and has failed to deliver with the AI features released so far.
While other tech giants quickly pivoted to all things AI when ChatGPT took off in late 2022, it took Apple two years to launch its first major AI tool, Apple Intelligence. In the year since, Apple has delayed new features, raising concerns that the company lacks a clear strategy to deploy the increasingly ubiquitous technology.
The Trump administration’s efforts to revive U.S. manufacturing haven’t helped matters. Apple makes the vast majority of its products in China and neighboring countries that may face high tariff rates. While Apple products are currently exempt from tariffs, the White House has repeatedly caught industry off guard with sudden and dramatic changes to trade policy.
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What Will It Take for Apple Stock To Catch Up?
“In our view, what needs to be settled before shares can regain more momentum is clarity on Apple’s AI strategy,” wrote Morgan Stanley analyst Erik Woodring in an iPhone 17 release preview earlier this month.
For months, Wall Street has been debating how Apple can turbocharge its AI efforts, whether through acquisitions or partnerships. CEO Tim Cook said in July that Apple is “very open to M&A that accelerates our road map.”
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Earlier this year, executives reportedly discussed acquiring AI search start-up Perplexity, which at the time was valued at $14 billion. But the company is notoriously averse to large deals. Despite booking nearly $100 billion in profit last year, Apple’s $3 billion acquisition of headphone maker Beats in 2014 remains its largest transaction to date.
For now, Apple appears to be prioritizing partnerships over acquisitions. In June, the company expanded its partnership with OpenAI to integrate ChatGPT into its devices. And Apple is reportedly considering partnering with Alphabet to launch an AI-powered search tool as part of a Siri revamp planned for next year.
Low iPhone 17 Expectations Could Be a Blessing
Woodring sees the potential for iPhone 17 upgrades to give Apple stock a slight boost in the near term.
iPhone launches tend to be “buy the rumor, sell the news” events, with shares running up in anticipation of the event and selling off as products are unveiled. This year’s event was no exception. Apple last week introduced the iPhone Air, its first major iPhone design overhaul in nearly a decade. Shares fell the day of the launch and have been treading water in the week since.
But according to Woodring, low expectations could be to Apple’s advantage. Wall Street consistently underestimated iPhone sales growth between 2011 and 2020, but has repeatedly overestimated growth since then. Woodring predicts this dynamic has made analysts too pessimistic about the upcoming iPhone upgrade cycle.
“The iPhone 17 launch as a ‘sell the news’ negative catalyst could actually turn out to be a positive catalyst for the stock, and set up potential positive estimate revisions and stock outperformance into year-end,” said Woodring.
A report from Bank of America on Tuesday suggested demand for the new line of iPhones is stronger than in recent years. As of Monday, a pre-ordered iPhone 17 was expected to ship within 19 days, compared with the iPhone 16’s 10-day wait at this time last year.
“In fact, the ship dates for the iPhone 17 are the highest since the iPhone 11, which indicates healthy demand,” according to the report.