Apple AI Event Disappoints, Supplier Stocks Fall Up to 9.5%

Apple's AI Event Disappoints, Leading to 9.5% Drop in LG Innotek and 4.1% in Luxshare Shares

By Barry Stearns

6/11, 01:10 EDT
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Key Takeaway

  • Apple's AI event at WWDC disappointed investors, leading to a 1.9% drop in Apple shares and significant declines for key suppliers like LG Innotek (-9.5%) and Luxshare Precision (-4.1%).
  • The tepid market response also affected AI-linked cryptocurrencies, with tokens like Render (RNDR) and (FET) falling between 3% to 6%.
  • Despite introducing new AI features including ChatGPT integration, investor sentiment remained pessimistic due to the lack of "killer content" and underwhelming iPhone shipment outlooks.

Lukewarm AI Launch

Apple Inc.'s recent unveiling of its new artificial intelligence features at the annual Worldwide Developers Conference (WWDC) received a tepid response from the market, impacting the shares of some of its key Asian suppliers. The event, which introduced the Apple Intelligence platform, failed to deliver any major surprises, leading to a downbeat outlook for iPhone shipments this year. This sentiment was echoed by Yang Seung Soo, an analyst at Meritz Securities Co., who noted, "It was disappointing that there was no killer content," and added that iPhone shipments are unlikely to exceed expectations.

The lackluster reception of the AI features had a noticeable effect on the stock market. South Korea’s LG Innotek Co. saw its shares tumble as much as 9.5%, marking the most significant drop since September 2022. Similarly, China’s Luxshare Precision Industry Co. experienced a 4.1% decline. Both companies derive more than 70% of their sales from Apple, according to Bloomberg data. Apple’s own shares fell 1.9% on Monday following the presentation, despite having rebounded nearly 20% from an April low due to a positive earnings report and high expectations for its AI strategy.

Supplier Impact

The ripple effect of Apple's AI announcement extended to other suppliers in Asia. Japan’s Sharp Corp. saw a 2.9% decline in its shares. However, not all related stocks were negatively impacted. Taiwan Semiconductor Manufacturing Co. (TSMC) bucked the trend, rallying after reporting strong sales figures for May. This divergence highlights the varied responses among Apple’s supply chain partners to the tech giant's latest developments.

The broader market reaction was also evident in the performance of AI-linked cryptocurrencies. Tokens such as Render (RNDR), (FET), and SingularityNET (AGIX) declined between 3% and 5% over the past 24 hours, while Bittensor's TAO tumbled nearly 6%. The CoinDesk Computing Index, which tracks tokens with AI-related utilities, lost 2.5% in market value, underperforming both Bitcoin (BTC) and the broader CoinDesk 20 Index. This decline underscores the high expectations that traders had for Apple's AI announcements, which ultimately fell short.

Key Conference Takeaways

Several key takeaways emerged from Apple’s WWDC event. One of the most anticipated announcements was the integration of ChatGPT, developed by OpenAI, into Apple’s products for features like text generation. This move aligns Apple with other tech companies that have already incorporated OpenAI models into their offerings. Additionally, Apple demonstrated other generative AI features and indicated plans to support more AI models in the future.

Apple positioned its new AI features as privacy-oriented, with many workloads being handled on-device. Craig Federighi, Apple’s software engineering chief, emphasized that personal data should not be "warehoused and analyzed in someone’s AI cloud." Despite these advancements, investor sentiment remained pessimistic. Greg Martin, co-founder of Rainmaker Securities, remarked before the conference, "If the event is uninspiring, I think the stock will be stagnant for a while."

The conference also provided updates on Apple’s Vision Pro augmented reality headset, which will receive a major software update to enhance content creation and control through physical gestures. Despite the hype, sales of the headset have been sluggish in recent months. Additionally, Apple announced a significant update to its voice assistant, Siri, marking the start of a new era with features like better natural language processing and the ability to take actions within apps on behalf of users.

Street Views

  • Yang Seung Soo, Meritz Securities Co. (Bearish on Apple):

    "It was disappointing that there was no killer content... iPhone shipments are unlikely to surprise on the upside."