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Apple (AAPL -3%) is exhibiting weakness today after estimated preorders for the newest iPhone reflect softer-than-anticipated demand. Apple unveiled its latest iPhone models last week, including the iPhone 16, iPhone 16 Pro, and iPhone 16 Pro Max. As the market has expected from the tech giant, design changes were minimal. Apple also revealed its latest Apple Watch and AirPods, products housed in the company's Wearables segment.

Apple's annual events, including its Worldwide Developers Conference, tend to accompany a sell-the-news reaction. However, often, the stock picks right back up where it left off. For example, shares slipped in June after iOS 18 was unveiled, only for the AI features to ultimately ignite excitement and send the stock to all-time highs.

However, this time around, things are shaping up slightly differently.

• Many of Apple's AI, or Apple Intelligence, features embedded in iOS 18 are only available on the current iPhone 15 Pro models and the upcoming iPhone 16 lineup. Given this exclusivity, investors and Apple suppliers were excited over the potential resurgence of demand the newest iPhones would bring as consumers flock to the latest phones purely to take advantage of an array of AI-related features.
  • For instance, Skyworks (SWKS), a prominent Apple supplier, stated in late July that it believed Gen AI would drive significant smartphone replacement. Similarly, Broadcom (AVGO) targeted a 20% jump in wireless revenue sequentially in OctQ, lifted by iPhone demand.
• However, some conservativism was still expressed across the smartphone landscape regarding Apple's latest iPhones. Qorvo (QRVO), whose largest customer is Apple, did not model a massive jump in smartphone replacements into its guidance in late July. Additionally, Verizon (VZ) noted that many of its customers are already on later versions of the iPhone, potentially fueling sluggish upgrades this year. AT&T (T) shared similar thoughts, stating that it has not seen anything in AI devices that would cause customers to declare world-changing.
• An uneven view of how the new iPhones would play out this year is partly due to competition. Samsung (SSNLF) has featured AI in its handsets for over a year, offering many of the features Apple took until June to debut, let alone release (many AI features in iOS 18 are not slated until October). Meanwhile, China-based Huawei, among other Android-powered devices, including those from Samsung, offer a more diverse set of smartphone designs, including folding phones.

When mixing these ingredients with unfavorable economic conditions as inflationary pressures produce upgrade hesitation among consumers, Apple's newest iPhones are underperforming expectations. That does not mean that in time, demand will accelerate. However, at the moment, investors are growing wary over whether Apple Intelligence is enough to nudge consumers toward the latest iPhones.