Apple (AAPL) Faces iPhone Demand Pressure. Can Its Growth Justify the Premium? Ali Ahmed Mon, October 12, 2026 at 10:39 AM EDT 4 min read AAPL +1.33% Trade Apple on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Apple Inc. (NASDAQ:AAPL) appears to be facing potential demand challenges for its latest iPhone models as rising memory-chip costs and higher prices weigh on consumers. On October 9, Reuters reported, pointing to a report by Nikkei Asia, that Apple had told some suppliers to lower production of components for its newly launched iPhone 18 Pro and iPhone 18 Pro Max. According to Nikkei, Apple became more conservative about shipments in early September and cut October component orders by at least 15% from what it had originally requested.
Despite this pressure, AAPL recently ranked 8th on our list of the 20 Best Performing Stocks Over the Last 20 Years. See which of the seven stocks ranked higher and why.
The production cuts raise questions about whether the company can maintain demand for its premium devices at higher prices. However, the report also noted that weaker demand from late August through October could also be related to Apple changing its launch schedule for iPhone models.
However, the company has already acknowledged the pressure from rising component costs. In June, Apple raised prices for iPads and MacBooks, noting that it could no longer shield customers from higher memory and storage chip costs, driven by the expansion of AI data centers.
Loyal Customer Base and Services Business Offer Support
Apple has some strengths that could help support its business. The company has a large and loyal customer base, with more than 2.5 billion active devices worldwide. This highlights the scale of its customer base and the potential for continued spending on its products and services.
The company's services business also provides an important source of recurring revenue beyond hardware sales. Revenue from services, which includes the App Store, iCloud, Apple Music, Apple TV+, and AppleCare, reached a record $30.7 billion in the fiscal third quarter ended June 27, 2026, up 12% year-over-year. Apple's App Store growth also showed improvement in September, offering another potential bright spot for investors. Continued growth in the services business could help the company's overall performance and reduce its reliance on device sales.
Higher iPhone Prices Could Weigh on Demand and Margins
Investors should note that Apple's latest pricing decisions could make it harder to maintain sales volumes. The iPhone 18 Pro starts at $1,199, while the iPhone 18 Pro Max starts at $1,299, with both models priced $100 higher than their respective predecessors. Higher prices may be discouraging buyers, who may want to delay upgrading or opt for less expensive alternatives.
At the same time, rising memory-chip costs could hurt Apple's profit margins. If component expenses continue to rise, the company may find it difficult to protect profitability without raising prices further. While higher prices can offset some of these costs, they may also discourage purchases.
Hedge fund interest in the stock slightly declined during the second quarter. According to Insider Monkey's database, 169 hedge funds held AAPL at the end of the second quarter, down from 170 in the first quarter.
Short interest remains relatively low. As of September 15, short interest stood at 0.88% of the company's float, indicating that bearish positioning in the stock remains limited.
AAPL appears richly valued as it trades at a trailing P/E ratio of 38.65 and a forward P/E ratio of 35.21, which suggests that investors are paying a substantial premium for the company's earnings and continue to expect future growth.
The company's large installed base, premium pricing power, expanding services business, and ability to generate substantial cash flow could justify a premium valuation. Investors comparing tech stocks may also want to see whether NVIDIA (NVDA) or Apple (AAPL) offers the better valuation in our analysis, "NVIDIA (NVDA) vs. Apple (AAPL): Which Stock Wins the Valuation Race?"
However, the valuation makes sustained earnings growth important for Apple and there is little room for disappointment. If iPhone demand weakens, production cuts continue, or higher memory-chip costs weigh on margins, we could see the company struggling to meet the expectations reflected in its share price. For now, Apple's premium valuation appears defensible, but sustaining it will depend on whether services growth and pricing power can offset potential weakness in iPhone demand and pressure on profit margins.
While we acknowledge the potential of AAPL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ ALSO: 10 Best US Stocks to Buy Under $50 and AMD's $8.2 Billion AI Bet Comes With a $1 Trillion Valuation Problem.
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