A Slumping Share Price Calls for Apple to Rethink Its AI Strategy

Apple Inc. is coming under growing pressure from investors to rethink its approach to artificial intelligence, as concerns rise over its lagging innovation and significant drop in market value. So far this year, the company’s stock has declined by 16%, wiping out more than $630 billion in market capitalization. Meanwhile, tech rivals such as Meta Platforms Inc. have gained investor favor thanks to their bold AI investments.

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A major source of investor frustration stems from Apple’s slow progress in integrating cutting-edge AI features across its ecosystem of devices. With the broader market increasingly focused on artificial intelligence as a key growth driver, Apple’s cautious and methodical approach has sparked criticism and calls for a strategic shift.

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According to Atif Malik, an analyst at Citigroup Inc., Apple has historically avoided large-scale mergers and acquisitions, preferring to build technologies in-house. Its last major purchase was the $3 billion acquisition of Beats in 2014. However, Malik believes sentiment would improve if Apple made a bold move—such as acquiring or taking a significant stake in a leading AI firm—to show it’s serious about catching up in this space.

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Investors are closely watching Apple’s strategy amid mounting concerns that it’s falling behind its peers. While the company also faces external headwinds such as rising tariffs and increasing regulatory scrutiny, its lackluster AI rollout has become a central issue. Despite expectations, Apple’s AI announcements at last month’s Worldwide Developers Conference were met with underwhelmed reactions.

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Although Apple didn’t comment on these concerns, there are signs it might be reconsidering its strategy. Bloomberg News recently reported that Apple executives have internally discussed acquiring Perplexity AI, a fast-growing startup focused on AI-powered search. A deal could help Apple accelerate its AI capabilities and bring in top-tier talent. Perplexity recently completed a funding round valuing it at $14 billion.

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Dan Ives, an analyst at Wedbush and long-time Apple supporter, believes such a deal would be a smart move. He said even if Apple paid $30 billion, it would be a “drop in the bucket” compared to the potential revenue AI could generate for the company in the future.

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Since publicly outlining its AI vision over a year ago, Apple has struggled to deliver meaningful advancements. The company is reportedly considering using third-party AI technology to improve Siri, rather than relying solely on its own models—a notable departure from its usual practice of building software in-house.

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Kevin Cook, senior stock strategist at Zacks Investment Research, agrees Apple needs to ramp up its AI hiring efforts. While he doesn't believe the situation is as dire as critics suggest, he acknowledges that a renewed focus on attracting AI talent is necessary. “Apple has hurdles, but it's not in the same danger as Google, which risked losing dominance if it fell behind,” Cook noted.

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Meanwhile, Meta CEO Mark Zuckerberg has been pouring money into AI development and aggressively poaching talent. Meta reportedly offered an Apple engineer a compensation package worth hundreds of millions of dollars to head its AI modeling team—an offer Apple didn’t match. Just last month, Meta announced a $14.3 billion investment in Scale AI, reinforcing its commitment to AI leadership.

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Apple, for its part, has the financial muscle to make big moves. The company had $133 billion in cash and marketable securities as of the end of March—almost double Meta’s cash reserves. Despite this, Apple has hesitated to take the same aggressive steps, a strategy that some investors now believe needs to change.

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In addition to pressure around AI, Apple is also experiencing internal changes. Longtime Chief Operating Officer Jeff Williams is stepping down, and Chief Financial Officer Luca Maestri exited last year. Bloomberg reported that CEO Tim Cook plans to remain in his role, although broader management shifts are in the works.

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Analysts at LightShed Partners argue that a leadership shake-up could be exactly what Apple needs. In a note to clients, Walter Piecyk and Joe Galone wrote that failing to lead in AI could dramatically alter Apple’s future prospects. They even suggested replacing Cook as CEO might be warranted to signal a serious course correction.

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Others, like Paul Meeks of Water Tower Research, believe Apple doesn’t necessarily need a change at the top, but it must make a bold move to stay competitive. “A significant acquisition would show investors that Apple is ready to evolve and adapt to the AI era,” Meeks said. “It’s clear they can’t win this race alone.”

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While Apple lags, the broader tech sector is booming. Bloomberg’s Magnificent 7 index—comprising Apple, Meta, Nvidia, Microsoft, Alphabet, Amazon, and Tesla—has rebounded nearly 40% from its April lows. The equal-weighted version of the index is nearing its record high from December, fueled by strong performance from Nvidia, Meta, and Microsoft.

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Apple’s next steps could determine whether it can maintain its position among this elite group—or fall further behind in the AI-driven tech race.

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