BofA update shows where active managers are putting money
Investing.com -- Apple’s efforts to drive hardware upgrades through artificial intelligence have so far fallen short, according to HSBC analysts, who say the company must deliver a more compelling AI experience to reinvigorate iPhone sales.
“The iPhone still represents about half of Apple’s sales,” HSBC wrote. But “initial hopes that AI would accelerate the renewal cycle have been short-lived.”
The bank said that Apple (NASDAQ:AAPL) Intelligence, unveiled in June 2024 and gradually rolling out through April 2025, has “so far failed to trigger significant improvement in user experience.”
Delays in launching the AI-powered Siri may lead many users to postpone handset upgrades, HSBC warned.
That leaves Apple relying on traditional hardware upgrades to drive demand. “Better specs with iPhone 17 in September should entertain the demand, in-line with what has been seen with the iPhone 16,” HSBC said, assuming no major tariff-driven price increases.
Tariffs are said to remain a significant concern. HSBC noted Apple “cannot re-localise production fast enough to avoid U.S. tariff hikes,” estimating that consensus forecasts now assume a 20% increase in tariffs on Chinese imports.
Apple has already flagged a $900 million margin hit for the June quarter, but HSBC still expects more than $100 billion in annual free cash flow.
On top of trade headwinds, legal risks are building. The European Commission is investigating Apple for potential violations of the Digital Markets Act, and a U.S. Department of Justice lawsuit alleging market monopolization adds “long-term risk to the business model,” according to the bank.
HSBC maintained a Hold rating with a $220 price target on Apple, citing a “5% regulatory discount” and warning that tariff and legal uncertainties could cap near-term upside.