The Siri AI did not impress enough to cause a pullback in Apple Inc. (AAPL.US). Is it a crisis of patience or a case of being mistakenly killed?

There are two reasons for the fall in stock prices: one is due to internal issues within the company, and the other is because investors have lost patience. The fall in the stock price of Apple Inc. (AAPL.US) is a good example of the latter. Last week, Apple Inc.'s stock price hit a 52-week high of about $315 before the WWDC26 keynote speech, released the finally functional AI Siri, approved a $100 billion stock buyback plan, and projected revenue to grow by 14% to 17% - all within the same week. However, the stock price then dropped by 8%. This was not a warning signal, but rather the market handing over a turning point to investors at a discount, and this selling wave was not reasonable. What triggered the selling wave? In short, Apple Inc. finally showed the world a truly functional Siri, something investors have been eagerly anticipating for the past two years. However, no one told us when users could actually start using it. This is the story behind the selling wave after the keynote speech. The market was not scared by the product itself, but rather impatient for the product to launch. Investors have reason to be impatient at this point, but this is still a relatively simple reason for selling, far less important than the product not meeting expectations. Where is Apple Inc. positioned now? As of Wednesday, Apple Inc.'s stock price closed at about $296. The stock has risen by about 10% since the beginning of the year, with a cumulative increase of over 50% in the past 12 months. The surprise stock price drop after the developer conference keynote was significant, but based on Apple Inc.'s historical experience, a period of calm is likely to follow. Is Apple Inc.'s stock still overvalued? Because this stock has always been considered overvalued. Currently, its forward price-to-earnings ratio is 34.17 times, meaning the stock is trading at a premium of 2.53% compared to industry peers. This indicator shows the ratio of the stock price to the company's expected earnings next year, quickly measuring whether the stock is currently overvalued. Compared to the median in the industry, the 0.71% premium is far from reaching the "overvalued" level, which is actually quite rare for a company of Apple Inc.'s caliber. Companies of this scale usually trade at a significant premium relative to their peers, so the potential undervaluation is worth paying attention to. Based on the past 12 months of performance, Apple Inc.'s price-to-earnings ratio is 36.28 times, just below the industry median. Unlike the forward price-to-earnings ratio, this indicator measures the company's profits over the past year. Among these two indicators, this one is less important, but it still shows that Apple Inc. could be undervalued compared to other companies in the industry. Apple Inc.'s PEG ratio, currently at 1.26 times, is slightly higher than the reasonable value of 1.0. This is where the argument of "Apple Inc. stock is expensive" falls apart. For years, Apple Inc.'s stock has indeed been excessively high, and historically, Apple Inc.'s premium was due to its closed ecosystem and strong cash reserves. But what's interesting now is that investors are no longer willing to pay that premium. In fact, it may be possible to buy in at a price slightly below the average for large tech companies and still receive one of the most stable income streams on the market. Even better, this potential undervaluation coincided with Apple Inc. finally addressing a major question that has plagued it for years - whether Siri is truly effective and competitive with other artificial intelligence. In general, consumers are willing to pay a reasonable price for a product that is getting better, rather than a lower price for a product that is getting worse, and Apple Inc. clearly falls into the former category. What factors could drive the stock price up? Apple Inc. has rebuilt Siri based on a custom version of Alphabet's Gemini model, and reportedly pays Alphabet about $1 billion annually for this. After this update, Siri was renamed Siri AI, and the model now runs in Apple Inc.'s own data centers. It is widely believed that Apple Inc. is waving a white flag with this move, as a company that has vowed to develop artificial intelligence its own way is now leasing a "brain" from a computer. However, analysts point out that this reaction is entirely unfounded - due to cost. Apple Inc.'s biggest competitors invest hundreds of billions of dollars annually in developing their own artificial intelligence, but no one truly knows what returns they will ultimately get. Will artificial intelligence eventually bring profits to Apple Inc.? For some companies, the prospects are clear, but for Apple Inc., no one can be sure - so it is not willing to take risks. Instead, Apple Inc. is simply using Alphabet Inc.'s Gemini to keep up with developments in the field of artificial intelligence, as Gemini remains one of the best artificial intelligence models currently available. The key is that Gemini powers Siri AI, which could significantly enhance Siri's capabilities in the future, but the annual cost of about $1 billion compared to Apple Inc.'s quarterly revenue is insignificant. In addition, Apple Inc. has stated that this agreement applies only to the current product cycle, which includes this generation of iPhones and their software. Therefore, once Apple Inc.'s own artificial intelligence is powerful enough to compete with Alphabet, it can quietly replace Gemini with its own system integrated into Siri without users even realizing the change. This way, Apple Inc. can break away from Alphabet in the future, while still retaining the customers and usage habits accumulated during the agreement period. So, why is this update worth paying attention to? The key is coverage - this has always been Apple Inc.'s advantage, which cannot be replicated by artificial intelligence labs. This update will cover over 2.5 billion active devices already in the hands of users. It's worth noting that OpenAI struggled to reach 900 million users per week, while Apple Inc. already has a large base of loyal users who not only have credit cards linked but also have developed usage habits. Don't expect the new Siri AI to replace leading AI models overnight, but from a business perspective, a "good enough" Siri AI is already installed on 2.5 billion devices, easily beating out an excellent AI that still needs to convince users to download apps one by one. So, what is the potential impact of Siri AI on Apple Inc.'s financial situation? In fact, artificial intelligence is almost fully integrated into Apple Inc.'s services business. This is because a smarter Siri will give users more "small" reasons to use Apple Inc.'s paid services. For example, users may click "yes" to make purchases in the App Store, or ultimately find that the value of iCloud exceeds the monthly fee. I don't believe that artificial intelligence will be a separate financial item, but it does help improve Apple Inc.'s existing financial performance. Therefore, it is still too early to accurately estimate the potential earnings that Siri AI could bring, as the management has not provided a release date or revealed any plans on how to profit from it - more on this will be discussed in the next section. What is more important is the direction of development. A more powerful version of Siri is about to be launched and will land on a massive group of devices, supporting Apple Inc.'s most profitable business, which bodes well for Apple Inc.'s future development. What are the risks? Every stock's potential for growth has its weaknesses, and the latest disclosure from Apple Inc. is that Siri AI will not be launched in the EU and mainland China regions - with Apple Inc. citing local regulations as the reason. This has a significant impact, as reports show that these two markets accounted for about 35% of Apple Inc.'s iPhone shipments in the past year, with only the European market accounting for nearly 27% of Apple Inc.'s sales in the last fiscal year. Therefore, about one-third of Apple Inc.'s iPhone sales are in regions where the new Siri AI cannot be used. This could be a problem, as Siri AI is currently one of the main reasons Apple Inc. attracts users, but one-third of Apple Inc. users cannot use this feature, and it is also unknown when they will be able to use it. Rather than being a temporary wait, this is more of a stalemate, as reports indicate that Apple Inc. previously applied to the EU for at least an 18-month exemption from its Digital Markets Act, but was rejected, and the EU has not provided a new timetable. The Digital Markets Act is a legal framework within the EU that regulates large tech companies. The situation in China is even more complex, as product approvals require cooperation with local partners, and are subject to laws beyond the control of Apple Inc. A point worth more attention than the delay itself is that while a delay has a definite endpoint, management can plan around it, regulatory restrictions have no time limit. Guidance from management For the third quarter of the 2026 fiscal year (June quarter 2026), revenue guidance is expected to grow by 14% to 17% year-on-year, which is quite good for a company like Apple Inc. But what really caught people's attention was the warning about gross margin. Chief Financial Officer Kevin Parekh pointed out that costs for memory and other components are rapidly rising, with even Tim Cook stating that these costs will be higher in the June quarter. Regarding the gross margin for the services business, the CFO's exact words were: "Therefore, at any given point in time, the relative performance of these businesses will impact the gross margin. This time, we are specifically focusing on the gross margin of the services business in the second quarter, which we mentioned earlier, increased by 20 basis points sequentially." The reason for this situation is the global shortage of memory chips, driven by the surge in demand from artificial intelligence infrastructure construction. Cook stated on the conference call that the root cause of the iPhone supply shortage is the lack of supply of the latest chips, as chip suppliers are reallocating part of their capacity to produce AI chips. Therefore, demand exceeds supply, and Apple Inc. is losing some profit as a result. This wave, which has driven the development of many tech companies including Apple Inc., has also driven up the prices of memory chips needed for Apple Inc.'s devices, directly affecting Apple Inc.'s profits - every increase in the cost of a chip reduces profit margin. The good news is that this situation will not last indefinitely. As memory suppliers such as Micron Technology, Inc. (MU.US) increase capacity, this pressure should be alleviated on its own. There are several other points worth noting from this conference call. The team has already indicated that iPads will face significant challenges this year compared to last year's strong start, and the overall outlook will depend on whether current trade and tariff rules remain unchanged. On a positive note, the board of directors has approved a $100 billion stock buyback plan and increased the dividend by 4% to $0.27 per share. How is the transition of senior leadership going? All of this comes with a changing of the guard in leadership, and timing is critical. The recent WWDC developer conference hosted by Apple Inc. was Tim Cook's last as CEO. He will transition to the role of Executive Chairman on September 1, 2026, and hand over the CEO position to current Chief Hardware Engineer John Ternus. Ternus's first keynote speech as CEO will take place at the iPhone launch event in September, indicating that the launch of the iPhone 18 will take place under the leadership of Apple Inc.'s new CEO. From an optimistic perspective, Cook is leaving at a peak time, with the company setting quarterly records, the artificial intelligence plan finally being introduced after two difficult years, and having a Hardware expert take on the highest position suggests the company will return to bold product innovation. However, some are concerned that Tim Cook's nearly perfect 15-year tenure as CEO is ending just when artificial intelligence promotion and simultaneous developments in Europe and China are erupting. The biggest risk during Tim Cook's tenure is that people may remember his failure with artificial intelligence promotion in 2024, and the Siri that never helped turn on the lights. Introducing an assistant that actually works before the transition period may help make up for these shortcomings. What is worth watching is what Ternus will say first about the two unresolved issues left by Cook - the release date of Siri AI, and the stalemate in Europe and possibly China. How the new CEO handles these issues in the first few months after taking office will be more telling than any keynote demo. Is it still advisable to invest in Apple Inc.? For now, Apple Inc. has been performing quite well in the face of recent challenges. It has found a low-cost way to enter the artificial intelligence field - relying on an unbeatable advantage: billions of devices already in people's hands. Moreover, the leadership transition was completed in a strong, not hasty, manner. Of course, the risks should not be overlooked, but investors are not being asked to pay the price for a company lagging behind the times. Considering all of this, analysts still maintain a "buy" rating for Apple Inc.