Analysts at D.A. Davidson downgraded Apple stock after its latest product launch, citing underwhelming iPhone upgrades and concerns about the company's inability to leverage artificial intelligence. This move reflects a broader skepticism from Wall Street regarding Apple's near-term innovation and artificial intelligence strategy.

U.S. technology giant Apple Inc. (AAPL) faced increased scrutiny on Thursday as D.A. Davidson downgraded the stock from a "Buy" to a "Neutral" rating. The revision followed the company's recent product launch event, which analysts characterized as "uninspired," raising concerns about Apple's capacity to effectively integrate and leverage artificial intelligence (AI) technologies. This downgrade contributes to a shifting sentiment among analysts, with Phillip Securities also reducing its rating for Apple.

The Event in Detail

D.A. Davidson maintained a price target of $250 for Apple, suggesting a potential upside of approximately 6.81% from the stock's previous close. The firm's analysts, led by Gil Luria, expressed initial optimism regarding Apple's role in the AI ecosystem and the potential for a major upgrade cycle. However, this perspective has evolved, with Luria stating, "Following recent product announcements that have left us uninspired, we believe that Apple may not significantly leverage AI anytime soon." He further added that until Apple can "redefine their current products or develop compelling new ones, we believe growth will remain constrained under the status quo."

Separately, Phillip Securities lowered its rating on Apple from "Neutral" to "Reduce," setting a more conservative price target of $200. This firm cited several headwinds, including tariffs, high capital expenditures, and a perceived lack of significant AI innovation. The analysts from Phillip Securities specifically questioned whether the newly announced iPhone 16 family, alongside the iPhone 17 and iPhone Air, are compelling enough to drive a substantial upgrade cycle.

Analysis of Market Reaction

The downgrades from D.A. Davidson and Phillip Securities reflect a broader reassessment of Apple's innovation pipeline, particularly in the rapidly evolving AI landscape. Apple shares traded up $4.04 during midday trading on Thursday, reaching $234.07, after falling sharply by 3.2% to $226.84 following the product launch. The volume of shares traded reached 55,768,555, exceeding its average volume of 45,223,864. This volatility underscores investor sensitivity to signals regarding the company's future growth trajectory.

The market's reaction is notably influenced by Apple's perceived lag in the AI race compared to its peers. Current Bloomberg data indicates that only 55% of analysts recommend buying Apple stock, a stark contrast to over 90% for other megacap technology companies such as Nvidia (NVDA), Amazon (AMZN), and Microsoft (MSFT). This shift has pushed Apple's average analyst rating to 3.9 out of 5, its lowest level in over five years, reaching a point not observed since the early pandemic period in 2020.

Broader Context & Implications

Despite a modest 0.6% bounce on Thursday, Apple shares remain down approximately 9% year-to-date. This underperformance stands against a 14% gain for the Nasdaq 100 index, which has been significantly propelled by the strong performances of Nvidia and Amazon. Apple's market capitalization stands at approximately $3.37 trillion to $3.48 trillion. The company trades at a Price-to-Earnings (P/E) ratio of 35.52 and a forward P/E of 29.5x, suggesting a premium valuation that analysts now believe may be stretched given current innovation concerns.

Concerns extend beyond product innovation to geopolitical and economic factors. Ongoing turbulence in China, a crucial market for Apple, combined with the impact of tariffs, continues to weigh on growth prospects. Tariffs alone are anticipated to create a $1 billion headwind for Apple in the September quarter. While Apple reported strong fiscal Q3 2025 results, with revenue of $94.0 billion (up 10% year-over-year) and earnings per share (EPS) of $1.57 (up 12%), outperforming analyst estimates, the services segment remains a significant growth driver, contributing $27.42 billion (up 13% year-over-year) and boasting a high gross margin of 76%. This segment's resilience provides a cushion against hardware cycle fluctuations.

Expert Commentary

Analysts are questioning the path forward for Apple in a market increasingly dominated by AI. Gil Luria's comments encapsulate the prevailing skepticism:

"While we were initially excited about the prospects of Apple's role in the AI ecosystem and potential major upgrade cycle, it has become clear that neither are likely to come to fruition in the near-term."

This sentiment is echoed by others who suggest that Apple's cautious, privacy-focused approach to AI, while strategic, may be causing it to fall behind competitors in monetizing the AI revolution. Some warn that without major AI breakthroughs in the next two years, Apple risks losing its competitive edge.

Looking Ahead

The immediate future for Apple hinges on its ability to demonstrate compelling innovation, particularly in the AI space. While Apple has confirmed significant investments in AI infrastructure and personnel, including seven AI-related acquisitions in 2025, and reported discussions with AI developers like Anthropic and OpenAI, the staggered release of Apple Intelligence and the delay of a fully contextual Siri upgrade until 2026 present near-term challenges. Investors will closely watch for concrete developments that can justify its premium valuation and reinvigorate growth. The company's ability to balance its privacy commitments with rapid AI deployment will be critical for maintaining market leadership and investor confidence in the evolving technological landscape. Despite the prevailing skepticism, some analysts, such as Dan Ives of Wedbush, maintain an optimistic outlook, foreseeing a "super cycle" for Apple over the next 12 to 18 months, driven by a large user base with older devices awaiting upgrades and the eventual allure of new AI-powered features. The wide range of analyst price targets, from $200 to $290, underscores the divergent views and the ongoing debate surrounding Apple's risk-reward profile.