TLDR

• Apple stock dropped more than 5% following political controversy and regulatory scrutiny.
• The Federal Trade Commission raised concerns about political bias on Apple News.
• Several institutional investors reduced their exposure to Apple stock amid growing risks.
• Apple’s increasing investments in artificial intelligence are raising concerns about rising costs.
• Despite strong quarterly earnings, investor confidence in Apple has weakened due to regulatory and political challenges.

Apple’s stock suffered a sharp decline after facing new political controversies, investor caution, and concerns about escalating AI investments. Despite a strong performance last week, Apple’s shares dropped more than 5% on Thursday. Regulatory issues and increasing scrutiny over its content platform added to the uncertainty.

Rally Reverses as Political Controversy Erupts

The reversal of Apple’s stock came after the Federal Trade Commission (FTC) raised concerns about political bias on the Apple News platform. FTC Chair Andrew Ferguson urged CEO Tim Cook to investigate claims of censorship, specifically regarding conservative outlets. The allegations suggest that Apple News may be promoting left-wing content while suppressing conservative views.

The FTC’s letter highlighted reports that claimed Apple News was skewed toward liberal sources. Apple, however, has yet to publicly respond to these allegations. This political controversy comes at a time when technology companies are already under close regulatory scrutiny.

Apple Stock Sees Institutional Investor Withdrawals

As political risks grew, institutional investors began reducing their exposure to Apple stock. Reports revealed that NBT Bank reduced its position by 5.3%, while Campbell & Co cut its holdings by over 70%. Other firms, such as Gamco, also lowered their stakes, signaling a shift in sentiment toward Apple’s stock.

Apple Inc., AAPL

These moves reflect a broader rotation out of large tech stocks as investors seek safer investments in the current market climate. The growing regulatory scrutiny, along with political controversies, has made Apple a less attractive option for some institutional investors. This caution comes after a long period of strong performance, during which Apple’s stock price reached new highs.

AI Spending Raises Fresh Concerns

Apple’s growing investment in artificial intelligence (AI) has raised additional concerns for investors. CEO Tim Cook has called AI a “profound opportunity,” but the rising costs associated with AI development are becoming a concern. Apple’s recent acquisition of Israeli startup Q.ai, which focuses on advanced human-computer interaction, highlights the company’s deepening commitment to AI.

Investors are increasingly questioning the high costs involved in AI research and infrastructure. The capital required to compete in the AI sector, especially for specialized chips and data centers, could put pressure on Apple’s profit margins. There are concerns that the commercial viability of certain AI technologies may not justify the hefty investment required in the short term.

Despite these challenges, Apple’s financial performance remains strong. The company’s recent quarterly results showed a 16% increase in revenue, reaching $143.8 billion. The iPhone continues to be a key driver, with record sales of $85.3 billion. However, investors are now focusing on how effectively Apple can manage its increasing AI costs and whether these investments will translate into long-term growth.

In the meantime, Apple continues to benefit from favorable policy changes in India, which support its supply chain strategy. However, these long-term advantages do little to ease investor concerns in the near term, as political scrutiny and AI-related costs dominate the narrative around the company’s future prospects.