Apple faces risk from memory cost spike in 2026: MoffettNathanson's Moffett

Core Viewpoint - Apple has experienced a record high recently but has lagged behind its peers in the "Mag 7" group throughout the year, raising questions about its performance in 2026, particularly regarding its AI capabilities and service revenue growth [1][3]. Group 1: Stock Performance and Valuation - Apple’s stock was previously rated as a sell but has shifted to a neutral stance, indicating a more balanced view on its valuation [2]. - The stock is considered fairly valued, with a focus on the growth of services revenue rather than hardware sales or AI advancements [3][5]. Group 2: AI and Services - There is skepticism about a significant upgrade cycle for iPhones driven by AI, as the initial expectations have not materialized [3][4]. - Apple has not invested as heavily in AI infrastructure compared to other big tech companies, which may affect its competitive positioning [6]. - The future of AI for Apple may lean more towards cloud processing rather than on-device capabilities, which could limit incremental revenue opportunities from new hardware [10][11]. Group 3: Market Position and Strategy - Apple is perceived as a safer investment choice within the mega-cap tech sector, with its performance being more dependent on the overall market conditions of the Mag 7 rather than its individual success [7][8]. - In a bullish market driven by AI, Apple may underperform, while in a downturn, it could serve as a defensive stock [7].