Apple Stumbles as AI Chip Shortage Hits iPhones

Apple shares plunged nearly 10% on Friday after the company issued weaker-than-expected guidance, with the iPhone maker warning that a shortage of key components was beginning to disrupt production. The shortage stems from soaring demand for chips used in artificial intelligence (AI) data centers.

Unless the stock recovers before the close of trading, it will mark Apple's worst single-day decline since the pandemic-driven market sell-off in March 2020. The company's market value fell by about $500bn within hours and, if the losses hold, Nvidia will once again become the world's most valuable company.

Apple CEO Tim Cook described the component shortage as very significant and said the company had only limited options to address it. The earnings report was his last as CEO before handing over to John Ternus in September.

Apple has so far absorbed higher memory chip prices by relying on existing inventories. Cook said those reserves are now running low, while processor shortages are preventing Apple from meeting strong demand for iPhones and Mac computers.

The company also forecast revenue growth of 9%–11% for the current quarter, below analysts' expectations. Investors were further disappointed by slower growth in Apple's services business.

(Reuters, bak)