Apple: Is it Time to Reload on AI Inflection Point?

Key Points

• Apple has been inundated with bad news in 2024 and distracted by regulatory infringements, including a recently filed U.S. Department of Justice lawsuit alleging monopolistic practices by Apple in the smartphone industry.
• Apple shares are trading down 10.5% YTD versus the 9.66% YTD gain of the S&P 500.
• Apple's talks with Google about licensing its Gemini AI technology on iPhones pulled Apple shares out of the grave off its YTD low of $168. 49.

While Apple Inc. NASDAQ: AAPL is a giant in the computer and technology sector, it is largely absent during the artificial intelligence (AI) frenzy. Most of its headlines these days pertain to major fines being levied on it from governments citing anti-competitive practices. While Siri was one of the first mainstream virtual assistants, it has been lagging when it comes to AI enhancements.

That was until recently, when rumors spread about the potential licensing agreement with Alphabet Inc. NASDAQ: GOOGL for its Gemini AI technology after talks with Microsoft Co. NASDAQ: MSFT ChatGPT technology fell flat. There are also rumors of using Bidu Inc. NASDAQ: BIDU Earnie AI in its Chinese iPhones. The recent AI rumors have breathed new life into its shares as they finally put in a bottom.

Apple Accused of Anti-Competitive Practices

Many details about Apple's alleged anti-competitive practices have made the news in 2024. Apple has been embroiled in several ongoing lawsuits. Apple was fined $2 billion in 2021 by the European Commission for anti-competitive practices in its App Store. They found Apple had unfairly restricted music streaming services like Spotify Technology S.A. NYSE: SPOT from competing with its Apple Music streaming service. There is also a growing movement advocating Right-to-Repair laws to force Apple to make it easier for repair shops to fix iPhones, which has hurt Apple's service revenues.

Epic Battle with Apple

Epic Games is still battling with Apple over its App Store fees and restrictions, and it is expected to be headed to court in 2024. Epic Games revealed that Apple collects a 30% fee on in-app purchases and microtransactions, similar to the Google Play store. Epic Games bypassed the App Store and offered direct app downloads through its service. However, Apple requires all app downloads on iPhones and iPads to go through its App Store. Epic argues that the 30% App Store fees are excessive and stifle competition, and the IOS ecosystem requirements give Apple too much control. They are pressing for the ability to sideload apps, meaning apps can be downloaded outside the App Store.

U.S. Justice Department vs Apple

The United States Justice Department filed an antitrust lawsuit against Apple over the iPhone monopoly. It alleges that Apple illegally engineered a monopoly in smartphones that cuts off competitors, keeps prices high, and stifles innovation. Apple's lack of NFC access to 3^rd party banking apps and the 30% Apple tax violates antitrust statutes. It claims that Apple has smothered the entire industry it helped revolutionize. Analysts fear Apple will be forced to change its business practices, which could impact its revenue model and force the company to incur big fines. This is causing AAPL shares to trade down 10.5% year-to-date (YTD) compared to the S&P 500 9.66% YTD performance. 

Can the AI Halo Save Apple's Stock? 

Tech companies are aware of the AI halo effect. Companies that have adopted AI and integrated it into their products and services and headlines soon feel the AI halo effect as share prices get elevated. AI rumors helped Apple's shares bounce from its YTD lows of $168.49. So far, Apple has not had a good year in 2024, as rumors indicate Apple squashed plans to roll out an Apple EV.

Aside from the Vision Pro, Apple has been criticized for its lack of innovation and new products, allowing competitors like Samsung Electronics Co. Ltd. OTCMKTS: SSNLF to surpass it. The market waits for any updates on Apple's foray into AI, as it is the only catalyst that can save its stock. Apple is expected to report earnings in late April 2024.

Apple analyst ratings and price targets are at MarketBeat. Apple's peers and competitor stocks can be found with the MarketBeat stock screener.

Daily Descending Triangle Pattern

The daily candlestick chart on AAPL illustrates a descending triangle pattern. The descending trendline started at $196.02 on January 24, 2024. Shares fell to a low of $168.49 on March 7, 2024. The daily market structure low (MSL) triggered the bounce through $173.70 as shares rejected off the descending trendline, pushing AAPL back into the triangle range. The daily relative strength index (RSI) is trying to bounce off the 40-band. Pullback support levels are at $168.49, $161.94, $154.15 and $150.83.