When tech titan Apple (AAPL) first announced that its new iPhone would feature artificial intelligence–or “Apple Intelligence,” as the company branded it–this caused a notable jump in analysts’ expectations. However, these high expectations have caused Jefferies analyst Edison Lee to worry that the new AI-enabled iPhones may not live up to the hype. As a result, Lee downgraded Apple from Buy to Hold with a $213 price target.
The analyst explained that current smartphone hardware is not yet advanced enough to handle the kind of AI capabilities consumers and analysts are hoping for and believes it’s too soon to expect a surge in smartphone upgrades driven by AI features. Instead, Lee thinks it will take at least two to three years for manufacturers like Apple to develop hardware capable of running AI software smoothly.
The initial rollout of the iPhone 16 has reportedly seen weaker demand compared to previous launches, with few customers citing AI as a reason for upgrading, according to a JPMorgan survey.
Nevertheless, while Lee is cautious in the short term, he did acknowledge that Apple is well-positioned to lead the AI smartphone market in the future due to its integrated hardware and software ecosystem, which many users point to as the reason why they refuse to switch to other brands.
What Are Analysts Saying About AAPL?
Despite Jefferies’ downgrade, most of the other Wall Street analysts remain optimistic, with a Moderate Buy consensus rating on AAPL stock based on 23 Buys, 10 Holds, and one Sell assigned in the past three months. After a 24% rally in its share price over the past year, the average AAPL price target of $248.90 per share implies 12.27% upside potential.
