Apple shares fell nearly 10% on Friday after a disappointing forecast showed that the iPhone maker was struggling to secure enough components as the AI-driven data center boom strains global supply chains.
The drop, if sustained, would mark the stock's worst day since the pandemic-driven selloff in March 2020. It would erase nearly $500 billion from Apple's market capitalization and return the crown of the world's most valuable company to AI chip giant Nvidia, days after reclaiming it.
Tim Cook, widely hailed as a supply-chain genius, called the shortages "very significant" and said Apple had limited options to address them, speaking on his final earnings call as CEO before handing the reins to John Ternus in September and becoming executive chairman.
"If even at Apple's scale they are saying they are out all supply chain flexibility, it's really bad for everyone," said Ben Bajarin, CEO of tech consultant Creative Strategies.
Big Tech has been scooping up advanced chip-making capacity and memory chips to power its AI data centers, sparking shortages and price increases that are expected to shrink both the personal computer and smartphone markets this year.
Apple had cushioned some of the blow from surging memory costs by drawing on stockpiled inventory, but Cook said that the buffer was fading and shortages of processors were keeping it from meeting strong demand for iPhones and Macs.
Its forecast on Thursday for revenue growth of between 9% and 11% in the current quarter fell short of Wall Street's roughly 12% estimate, and softer growth in its services business also overshadowed otherwise strong June-quarter results.
Services weakness worries investors
The services weakness worried investors as it came during a stretch of strong iPhone sales, which typically feed the business that takes a cut of App Store purchases and includes everything from Apple Music to Apple TV.
That slowdown could deepen if iPhone sales take a hit from a price increase that many analysts expect during the launch of the new lineup, which typically happens in September.
"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 said.
"In fact, one could argue App Store softness might even be a result of AI re-prioritizing customer time."
Still, some analysts said that the iPhone has weathered price hikes before without denting demand significantly and that a recent US leasing deal with Klarna that offers monthly plans for Apple's devices could soften the blow.
At least four brokerages cut their targets for the company's stock price, while three raised. That moved the median view to $330, which is $3 lower than the last closing price, according to LSEG data. The stock has risen 22.7% this year as of Thursday's close.
