Apple’s (NASDAQ: AAPL) stock is down 20% this year. It was the company with the top market capitalization at the start of the year. At $3 trillion today, it is now behind Nvidia (NASDAQ: NVDA) and Microsoft (NASDAQ: MSFT). Soon, it could fall behind Amazon (NASDAQ: AMZN). Several factors have contributed to the decline in the stock’s value. The latest of these is a plan by President Trump to impose a 25% tariff on iPhones manufactured outside the US. Apple’s gross margins would be decimated if that happens.
Key Points
Apple’s years of success were driven by the fact that there has not been a single generation of iPhone that had had a significant stumble since it was launched in 2007. It is astonishing to think a product could still be a success in the market with almost two decades of home runs. Additionally, the iPhone has contributed to a universe of approximately 2.3 billion Apple devices worldwide. This, in turn, has been a conduit for Apple’s services business, which is led by its App Store.
The threat of high tariffs on imported iPhones is just one of a series of problems that have arisen this year. Apple has delayed the launch of advanced AI features until next year. It does not have a partner in China to launch AI features there. China is the largest smartphone market in the world, approximately three times the size of America’s.
Both the Department of Justice and the EU are looking at what they call Apple’s monopoly. Google faces a similar problem. If Apple is forced to break apart, its “walled garden” of software and hardware could be torn down.
Yet another hurdle for Apple is that its top line is not growing quickly. In its most recent quarter, revenue rose only 5% year over year to $95.4 billion.
Apple is facing its first colossal problems in two decades. Based on their size, there is no easy way out.
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