HSBC analysts caution that Apple’s (NASDAQ:AAPL) current AI efforts have yet to significantly accelerate iPhone upgrade rates, which still represent roughly half of the company’s revenue. Early hopes that AI integration would speed up device replacement cycles have not come to fruition, according to the bank.
Apple launched its AI platform in June 2024, with a gradual rollout continuing through April 2025, but so far it has not substantially improved the user experience. HSBC warns that delays in releasing an AI-enhanced version of Siri could cause some customers to postpone buying new iPhones.
Consequently, Apple remains reliant on conventional hardware enhancements to stimulate sales. The forthcoming iPhone 17, expected in September, is anticipated to deliver upgraded features that could sustain interest at levels similar to the iPhone 16 cycle—assuming tariff-related price hikes don’t become significant.
Tariffs continue to pose a challenge. HSBC points out that Apple is unable to quickly shift manufacturing away from China to sidestep looming U.S. tariff increases on imports, which analysts estimate could climb by 20%. Despite Apple’s warning of a $900 million margin hit in the June quarter, HSBC still projects the company will generate over $100 billion in free cash flow annually.
In addition to trade-related hurdles, Apple faces mounting legal pressures. The European Commission is investigating potential violations of the Digital Markets Act, while a U.S. Department of Justice lawsuit accuses Apple of monopolistic behavior—a factor HSBC views as a “long-term risk” for Apple’s business model.
HSBC maintains a Hold rating on Apple with a price target of $220, factoring in a “5% regulatory discount” and noting that uncertainties around tariffs and legal issues may restrain upside potential in the near term.
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