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Investment Bank Slashes Its Rating on Apple Inc (AAPL) Stock to Underperform

Investment bank Jefferies on Friday cut its rating on Apple Inc (AAPL) stock to Underperform from Hold. As reasons for the downgrade, Jefferies cited its belief that the company’s guidance for the current quarter is overly bullish, along with the tech giant’s declining margins.

Jefferies placed a $170 price target on the name.

Overly Bullish Guidance

 Apple Inc (AAPL) said that it expects its top line to increase by around 1% to 5% during the current quarter, compared with the same period a year earlier.

But according to Jefferies, the company’s outlook assumes that no tariffs will be levied by the Trump administration on India and Vietnam, while Chinese imports will only be taxed at a 20% rate. The investment bank believes that tariffs on these countries will likely end up being significantly higher over the longer term.

Further, the negative effects of tariffs on Apple Inc (AAPL)’s earnings are likely to increase over the longer term, Jefferies warned.

Declining Margins

The gross margin on Apple’s products fell 0.7 percentage points last quarter versus the same period a year earlier, Jefferies reported.  According to the investment bank, declining gross margins are likely to put downward pressure on AAPL’s earnings going forward.

While we acknowledge the potential of AAPL, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey

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When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
  • 107 Amazons
  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

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Even if that $250 trillion figure sounds ambitious, major firms like PwC and McKinsey still see AI unlocking multi-trillion-dollar potential.

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  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
  • Larry Ellison — through Oracle, is spending billions on Nvidia chips and partnering with Cohere to embed generative AI across Oracle’s cloud and apps.
  • Warren Buffett — not known for tech hype — says this breakthrough could have a ‘hugely beneficial social impact.

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