By Ryan Vlastelica, Bloomberg
Apple’s status as an anti-artificial intelligence play helped the stock tear through the first half of the year as investors grew skeptical of the AI trade. But that sentiment has flipped, and the shares are struggling.
Since closing at a record high on July 28, Apple shares have fallen roughly 10% following the iPhone maker’s disappointing earnings. In addition, investors rotated back into perceived AI winners as results from Microsoft, Amazon and Alphabet assuaged fears about overspending on the technology and sent the shares of the biggest AI spenders higher, along with chipmakers and other beneficiaries of those investments.
“There’s been this ebb and flow of angst and enthusiasm over capex all year, and while July was all about concern over capex, the latest earnings results clearly allayed some of that angst, leading to this rotation,” said Jordan McCall, senior portfolio manager at Russell Investments, which has $418 billion in assets. “I expect the see-saw to continue now that there’s more comfort with spending, and as Apple remains a different expression of the AI capital cycle.”
Apple, which has opted to power its AI services through partnerships and avoid the costly arms race for computing infrastructure, is among the 25 worst performing stocks in the S&P 500 Index over the past three weeks. Meanwhile, the rest of the technology industry is heading in the other direction, with the Nasdaq 100 Index up 6.6% over that period and the Philadelphia Stock Exchange Semiconductor Index, better known as the SOX, advancing 10%.
That’s a reversal from July, when Apple shares rose 6.8%, the Nasdaq 100 fell 6.6% and the semiconductor index plunged 21% for its worst month since 2008 as investors questioned how much longer the massive AI spending would last.
Apple’s gyrations are the latest demonstration of the stock’s increasing detachment from the broader market. Its 40-day correlation to the S&P 500 is basically zero, the lowest since 2013. Its correlation to the chip index is the lowest in data going back to 1994 and recently flipped to negative, meaning it’s moving in the opposite direction of semiconductor stocks.
The trend continued on Tuesday, when Apple’s 0.4% rise came in contrast to a 3.8% decline in the SOX, while the Nasdaq 100 fell 1.4%.
“It makes sense that Apple isn’t going to trade on a one-to-one basis with the AI infrastructure supply chain, and that there are going to be times when that inverse correlation hurts them,” said Clayton Allison, portfolio manager at Prime Capital Financial, which has about $50 billion in assets and holds Apple shares. “Not spending looks smart when you’re worried about spending, but now that the AI trade is going strong, we can’t say that it’s reaping the rewards the others are.”
In fact, the flood of money into computing infrastructure is directly hurting Apple by driving up the cost of components used in its devices and making others scarce. Prices of memory chips, which are estimated to represent 10% to 20% of the cost of building a smartphone, have soared amid insatiable demand from data centers.
With the cost of memory expected to remain elevated for an extended period, investors worry the higher costs will eat into profit margins or weaken demand, especially if Apple increases iPhone prices, as it already has for other products including iPads and Mac computers. The issue is especially important as Apple is expected to unveil a foldable iPhone next month.
Jefferies cited the risk of higher iPhone prices last week when it cut its rating on the stock to underperform, one of a growing number of sell-equivalent ratings on Apple shares. Of the 58 analysts tracked by Bloomberg who cover the company, six now recommend selling, the most in nearly two years.
A foldable phone is “the only key driver of higher ASP and margin” over the coming years, analyst Edison Lee wrote in a note to clients on Aug. 10, referring to average selling prices. Memory prices will result in a higher costing product, and “we still believe such an expensive phone would be a niche product,” he said.
To make matters more challenging, Apple shares have gotten so expensive that the company may not have room for a disappointment. The stock is priced at 32 times estimated earnings, making it the most expensive among the seven most valuable US technology companies, which also include Nvidia Corp., Broadcom Inc. and Meta Platforms Inc.
©2026 Bloomberg L.P.
