Why Are Investors Losing Faith in Apple's AI Endeavours?
This might be one of the trickiest years in Apple's long and illustrious history.
It remains one of the most influential companies in the global economy, but it has had to deal with a series of tough setbacks in 2025, many of which suggest that it is losing ground to a new generation of businesses.
First there was the fractious run-in with US President Donald Trump over DEI – a saga which threatened to compromise the financial relationship between the iPhone manufacturer and the White House.
Then came Apple's annual conference, the WWDC, where the announcements and launches the company made were widely viewed as underwhelming compared with previous editions.
After that, news emerged of Apple's desire to partner with either Anthropic or OpenAI for its AI reimagining of Siri, which sparked disappointment from the company's AI team.
Perhaps the bitterest pill to swallow has been the loss of Ruoming Pang, Apple's foremost AI executive, who was poached by Meta earlier in July.
The California-based tech giant's travails this year have not been catastrophic. Rather, they have been symptoms of the firm's flatfooted-ness in the AI arms race.
The result has been a US$630bn dive in market value and a 16% fall in shares, which has seen its rival Nvidia leapfrog it to become the world's most valuable company.
Now, it seems as though Apple's investors have had enough: they are demanding progress.
Does Apple need to change its strategy?
In the past, Apple has always kept the development of its core technologies in house but, in what would be a huge break with tradition, analysts are encouraging Apple to make a series of acquisitions in the technology to keep pace with its competitors.
It would seem that the company's internal R&D of AI technologies has not gone as smoothly as was first hoped, which has caused the confidence of the board to falter.
Analysts are urging Apple to break with its longstanding reluctance to pursue major acquisitions, suggesting the company needs to buy established AI capabilities rather than develop them internally.
"Historically Apple does not do big mergers and acquisitions," says Atif Malik, Analyst at Citigroup.
"Investors would turn more positive if Apple could acquire or invest a meaningful stake in an established AI provider."
Apple's largest acquisition of all time remains its US$3bn purchase of Beats more than a decade ago. For Apple's rivals, like Microsoft, Google and AWS, these kinds of deals are far more common.
Perplexity emerges as a potential target
In June, Bloomberg reported that Apple executives had held internal discussions about the potential of acquiring AI start-up Perplexity AI, which is a widely used Gen AI chatbot, recently valued at US$14bn.
Bloomberg also revealed that Apple had been in contact with both Anthropic and OpenAI, exploring the idea of licensing agreements that could bring either Claude or ChatGPT to Apple devices, though both negotiations appear to have stalled.
Dan Ives, Analyst at Wedbush, called buying Perplexity a "no brainer," suggesting that even a US$30bn price tag would be "a drop in the bucket relative to the monetisation opportunity Apple can achieve on AI".
Despite the huge outlay, sanctioning a move for Perplexity would give Apple access to the talent and the tech required to develop its own AI-based search engine, the likes of which Google has launched recently.
What does Meta's aggressive strategy say about Apple?
Across Silicon Valley, Meta has been extremely busy. Mark Zuckerberg's company has committed huge sums in the recruitment of AI talent, which has been in stark contrast with Apple's more conservative approach.
The Facebook owner recently lured an engineer who ran Apple's AI models team with a compensation package worth hundreds of millions of dollars over several years, with Apple reportedly making no attempt to match the offer.
This followed Meta's US$14.3bn investment in Scale AI last month, demonstrating the company's commitment to AI infrastructure.
Apple possesses substantial resources to compete, with cash and marketable securities totalling US$133bn at the end of March—nearly twice Meta's cash reserves.
However, the company's AI feature rollouts have consistently underwhelmed investors, including those unveiled at its Worldwide Developers Conference last month.
Apple has reportedly considered using external AI technology rather than in-house models to power a new version of its Siri digital assistant.
Does Apple need to do 'something bold'?
Recent executive departures suggest Apple may be preparing for broader strategic changes. With Chief Operating Officer Jeff Williams retiring after a decade in the role and long-time Chief Financial Officer Luca Maestri stepping down last year, things are shifting in Cupertino, California.
Questions about the future of CEO Tim Cook have also swirled in recent days, though Bloomberg has reported that Cook is likely to remain in post despite the upheaval.
Analysts at LightShed Partners argue that a shake-up is "exactly what Apple needs right now," warning that "missing on AI could fundamentally alter the company's long-term trajectory and ability to grow at all".
Paul Meeks, a Senior Analyst at Water Tower Research, believes that Apple needs to do "something bold," saying that "a significant deal would not only help them in AI, but show it is committed to a culture change and course correction".
"It can't do AI on its own," he explains.
