Apple Was Always 1 Step Behind in AI. In Chipmaking, It’s Now 1 Step Ahead.

Apple (AAPL) just made a strong move to improve its AI reputation. The company spent two years being seen as a step behind in AI, yet it has quietly become the first to introduce a 2nm chip. Its new M6, built on TSMC’s (TSM) most advanced 2nm process, is the first of its kind in a consumer computer. The chip debuts in a new Mac mini, alongside a more powerful M5 Ultra in the refreshed Mac Studio. 

Apple says the M6 delivers nearly 30% more peak GPU compute for AI than the M5 and over eight times that of the M1. This lets it run AI models on the device faster. With up to 32GB of memory, it can run large language models (LLMs) locally without sending anything to the cloud. Preorders are now open, and the Mac Mini starts at $899, shipping Sept. 22.

Apple’s Quiet Bet Against Data Centers

Look past the specs, and the M6 is really about something else. Amazon (AMZN), Microsoft (MSFT), Meta (META), and Alphabet's (GOOG) (GOOGL) Google spent a combined figure of over $650 billion this year on AI data centers. Apple’s AI budget is a small fraction of that. The company is betting the future of AI lives on the device in your hand rather than some remote data center. Apple already has roughly 2.5 billion devices in use. Every M6 it ships turns another Mac into a machine that can run AI on its own, privately. Rivals are spending fortunes to run AI in the cloud. Apple’s edge is that it can put AI directly onto the massive base of devices people already own, without that kind of spending.

There is one issue worth noting, and it is something I wrote about recently. Apple’s weak spot has never been the hardware. It is the software meant to run on it. The revamped Siri slipped by more than a year and now leans on Google’s Gemini, and the camera AirPods just moved to 2027 for similar reasons. The chip is ready. Whether Apple can deliver the models to use it fully is still in doubt. 

One choice stands out. Apple put its first 2nm chip in the Mac, not the iPhone. That is because the Mac is where people run the heaviest AI locally, and it shows Apple expects serious on-device AI to take off on the computer first. 

About Apple Stock

Apple designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories. Its products include iPhone, Mac, iPad, Apple Watch, Home, and Accessories. Moreover, Apple also provides services to its customers, such as AppleCare, cloud services, digital content, and payment services. The company sells its products through its retail and online stores and a direct sales force. Founded in 1976, the company is headquartered in Cupertino, California. 

Over the last 12 months, AAPL stock has climbed approximately 36%, comfortably outperforming the S&P 500 Index’s ($SPX) 19% gain over the same time. However, despite this strong performance, the shares came under pressure after the earnings report. Apple shares were trading around $338 before the results and fell to approximately $303 in the days that followed. Since then, the stock has been trading sideways. Concerns over supply chain constraints were one of the reasons for AAPL stock's decline. Additionally, weaker-than-expected performance in the Services and China segments also weighed on investor sentiment. 

AAPL stock is priced a little richer than usual. The forward GAAP price-to-earnings (P/E) of 35.22x is about 20% above its 5-year average of 29.30x. Similarly, the price-to-sales (P/S) ratio of 9.48x is also roughly 25% above its 5-year average of 7.56x. The EPS outlook is steady but doesn’t make the premium obvious on its own. Analysts expect growth of 18% in 2026, 8% in 2027, 13% in 2028, and 16% in 2029. The numbers aren’t spectacular, but the estimated growth is still decent for a company already worth trillions. 

The balance sheet isn’t much of a concern. Apple holds $62.40 billion in cash against $84.34 billion in debt. The resulting net debt of roughly $22 billion seems manageable for a company of this scale and generating enormous free cash flow. For investors, the premium reflects confidence in Apple’s ecosystem and dependable earnings. However, the modest growth pace is also why the market keeps questioning whether Apple can turn its AI push into the next leg higher. 

September Quarter Guidance Disappoints

Apple Inc. announced its third-quarter fiscal 2026 earnings on July 30. It reported a stronger-than-expected quarter with revenue of $109.42 billion, up 16% year-over-year (YoY). Its gross margin was 50.1%, up 80 basis points sequentially. This included a benefit from tariff refunds, which had a favorable impact of approximately 2 percentage points. Operating expenses for the quarter came in at $19.1 billion, up 23% YoY, driven by investments in R&D. 

Looking forward, Apple guided for the fourth-quarter revenue growth of 9% to 11% YoY. Foreign exchange would be a 2.5 percentage point headwind to growth, and supply constraints would increase significantly from the previous quarter. CFO Kevan Parekh said the company expects the iPhone growth rate to be mid-teens YoY, and for Services, it expects the September quarter YoY growth rate to be largely similar to what the company reported in the June quarter. Moreover, gross margin is expected to be between 47% and 48%. CEO Tim Cook said supply chain problems are expected to get worse in the coming quarter. The company is facing shortages of advanced chips used in its products, which could limit production and make it harder to meet customer demand. 

What Do Analysts Expect for AAPL Stock?

Wall Street seems to remain divided on AAPL stock. Jefferies downgraded AAPL to “Underperform” from “Hold” and assigned a price target of $263, down from $285. On a positive front, Bank of America Securities reiterated a “Buy” rating on the stock with a price target of $380. The firm expects incoming CEO John Ternus to continue creating additional growth opportunities through AI features, new products, and continued share buybacks. Similarly, AAPL also received a “Buy” rating from Rothschild & Co Redburn analyst Timm Schulze-Melander, who set a price target of $400, up from $260. 

Based on 41 Wall Street analysts, Apple holds a “Moderate Buy” rating. The current stock price sits close to the median target of $328.62, while the lowest price target is $240. The high target of $400 reflects an additional 28% upside from the current share price.