Apple Faces Challenges in China and AI as Stock Drops 4%

Apple shares tumbled 4% on Thursday, marking their worst day since August 5, amid growing concerns over declining iPhone sales in China. The stock has now fallen nearly 12% from its December peak, making it the poorest performer among the top seven technology companies in 2025.

Market watchers report that Apple shipped 15% of the 284 million smartphones sold in China in 2024, a decline of 17% compared to the previous year. The company has slipped to third place in the Chinese smartphone market, behind domestic brands Vivo and Huawei, which have seen significant growth. This underperformance in a critical market has raised alarms for investors.

Adding to the pressure, Taiwan Semiconductor Manufacturing Company (TSMC), a major Apple supplier, forecast a 6% related drop in smartphone-related revenue for Q1 2025, attributing the decline to seasonality. Interestingly, AI chips have now surpassed smartphones as TSMC’s largest revenue driver, comprising more than half of its Q4 earnings 

What Does This Mean for Me?

Analysts predict a 6% annual decline in iPhone shipments during the first half of 2025, with most of the drop expected in the second quarter. This weakness can partly be blamed on Apple Intelligence, the company’s artificial intelligence system, which remains unavailable in China. Despite its potential, the system hasn’t driven hardware upgrades or boosted Apple’s services revenue.

Investors now await Apple’s earnings report on January 30 for more clarity on the company’s performance and outlook. With its challenges in China and a shifting AI landscape, Apple’s ability to adapt will be closely scrutinized.