Apple Faces Investor Pressure Over Trade Risks and AI Setbacks Amid Weak iPhone Sales

Apple (AAPL.O) is bracing for a wave of scrutiny as it prepares to release its quarterly earnings on Thursday, with investors and analysts closely watching how the tech giant is navigating two major challenges: the delayed introduction of artificial intelligence capabilities and the looming threat of U.S.-China tariffs.

Although Apple enjoyed a surge in demand for its new budget-friendly iPhone 16e during the January–March period, fueled in part by consumers trying to beat possible tariff hikes, analysts still anticipate a slight dip in iPhone sales. 

If confirmed, this would be the company’s second consecutive quarterly decline in smartphone sales.

So far, electronics have avoided being targeted by tariffs under the Trump administration. However, signals from Washington suggest that new duties could be imposed soon. 

Apple, which relies on Chinese manufacturing for 90% of its products, has already seen its stock drop over 16% this year—resulting in more than $600 billion being wiped from its market capitalization.

To reduce exposure to tariff risks, Apple is reportedly moving production of some iPhones destined for the U.S. to India, according to Reuters. 

Analysts expect Apple will attempt to absorb some of the additional costs across its supply chain while minimizing any price hikes that could jeopardize its competitive position. 

“Tariffs are a sword of Damocles for Apple – dangling, disruptive and politically charged,” noted Eric Schiffer, chairman of the California-based Patriarch Organization, which holds Apple stock.

Related story: Market Uncertainty Spurs Unexpected Demand for Intel’s Older Chips

Lagging AI Innovation Raises Competitive Concerns

Unlike competitors such as Samsung and Google, Apple has lagged in rolling out key AI enhancements. One major delay involves upgrades to Siri, which won’t arrive until 2026. The company even withdrew an ad highlighting AI features that had yet to be made available.

In China, where Apple’s market share is under pressure from domestic rivals like Huawei, the lack of advanced AI features has been a particular liability. 

While Apple has teamed up with Alibaba to integrate AI capabilities in the region, it has not provided a clear rollout schedule. 

iPhone shipments in China dropped 9% in the March quarter—making Apple the only major smartphone brand to report a decline there, according to IDC.

Despite these setbacks, strong sales of the iPhone 16e in India helped Apple claim the top spot in global smartphone sales during the quarter, as per Counterpoint Research. 

However, analyst Jacob Bourne of eMarketer warned, “With tariffs threatening cost structures, Apple faces pressure to move faster on AI innovation and supply chain realignment – both of which are capital intensive.”

Looking ahead, Apple is expected to post a 4.2% increase in revenue for the fiscal second quarter, mirroring the growth rate of the previous quarter. 

This gain will likely be powered by robust iPad sales, projected to rise 9.1%, and an 11.8% expansion in the services segment, Apple’s second-largest revenue source.

Read next: Amazon Sellers Scale Back Prime Day Plans Due to Trump-Era Tariffs