Cautious Optimism Builds for Apple on Wall Street as Further Challenges Lie Ahead

It’s been a turbulent year for many of the Magnificent Seven stocks that drive the performance of the S&P 500, but for Apple (NASDAQ: AAPL), 2025 has been exceptionally tumultuous. Can the tech giant recover in the second half of the year?

The stock closed the first half of 2025 down 15.86% as Apple tussled with trade tariffs and its sluggish adoption of artificial intelligence technology.

However, Jefferies analyst Edison Lee recently pivoted from a bearish stance on AAPL to occupy a neutral position on the stock, upgrading it to a hold rating from underperform.

Lee suggested that Apple may soon benefit from a degree of stability thanks to more positive Q2 2025 results, even despite the long-term dangers associated with the Trump administration’s reciprocal tariffs and their impact on the firm’s global supply chain.

As one of the few Magnificent Seven stocks that’s in negative territory in 2025, it’s clear that Apple is failing to benefit from Wall Street’s AI-driven boom of late, and the stock can be seen to be lagging behind its counterparts in this regard.

With the arrival of Apple’s AI-infused upgrade to Siri shelved until 2026, Deepwater Asset Management analysts Gene Munster and Brian Baker claimed in a recent blog post that the tech giant is incapable of developing its own large language model (LLM) for Siri and instead will need to lean on third parties to realize its artificial intelligence ambitions.

However, signs of Apple tackling its challenges head-on appear to be soothing investor fears and even building a sense of cautious optimism. Could AAPL be about to make up lost ground on its fellow Magnificent Seven stocks in the second half of 2025?

Addressing Apple’s AI Problem

The return of optimism to Apple’s stock resulted in a return to its highest level in six weeks following a run of three consecutive days of growth.

The catalyst for the positive movements was a report that Apple could use artificial intelligence firms like ChatGPT creator OpenAI or Anthropic to provide the LLMs that can power Siri from 2026.

Apple has already held talks with both companies about utilizing their AI models rather than developing its own technology, and the move represents a prospective turning point in the firm’s artificial intelligence adoption initiatives.

Although AAPL has experienced periods of underperformance on Wall Street before, falling 15.86% over H1 2025 while the S&P 500 gained 5.73% will be a major concern for investors.

“With a P/E ratio of around 31.9, investors still firmly believe that Apple will deliver on its AI initiatives in the months ahead,” explained Steve Frauzel, head of market insights at Just2Trade. “Although nowhere near as high as Magnificent Seven stocks like Tesla and Nvidia, Apple’s P/E suggests that evidence of successful AI adoption is essential in the months ahead.”

Innovation Pipelines to Deliver

Apple will undoubtedly rely on its history as an innovative tech firm to mount its long-term market recovery.

Although the tech giant’s bungled rollout of an AI-powered Siri has been a cause for concern, Apple has a strong innovation pipeline that’s likely to continue inspiring investors.

Crucially, the firm has identified head-mounted devices as its next major market opportunity, according to TF International Securities analyst Ming-Chi Kuo, and Apple is working on at least seven projects within the category, including four variations of smart glasses and three vision-based products.

Apple has long looked to smart wearables as a core component of its future innovations, and although consumers will need to wait until 2027 for the company’s first smart glasses launch, investors appear optimistic about their eventual market impact.

Apple is also reportedly working on implementing extended reality (XR) glasses with liquid crystal on silicon (LCoS) displays, as well as voice controls and gestures, which the company hopes to begin production on in Q2 2028. It’s these innovations that could help to ensure AAPL’s long-term growth in spite of its stuttering 2025 so far.

Tariff Threats Loom

Apple has been disproportionately caught up in the Trump administration’s aggressive stance on trade, with President Trump himself taking to social media to suggest that he had “long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else.”

Given the sheer complexity of moving production to the US, it’s reasonable to expect that Apple will continue to rely on global supply chains. However, Edison Lee suggests that Trump’s tariffs could cause a 7% hit to earnings per share in the 2025 fiscal year in a scenario where the US upholds a 10% tariff on India, 20% on Vietnam, and 30% on China, which are all key manufacturing hubs for Apple devices.

With this in mind, investors adopting a more short-term or risk-averse mindset may benefit from keeping their ears to the ground regarding US trade deals and how they can play out in areas affecting Apple’s supply chain.

Short-Term Prospects Remain Hazy

Apple is one of Wall Street’s most exciting stocks, and its struggles in 2025 can mask the fact that its market capitalization is still well in excess of $3 trillion.

The stock has consistently out-innovated its rivals, and there’s plenty of optimism for Apple’s smart glasses, which could transform the fortunes of the company upon their initial rollout, which is pencilled in for 2027.

In the short term, tariff uncertainty could hinder the growth of AAPL, and its shaky relationship with AI may still see the stock lag behind its Magnificent Seven counterparts for a little longer.

Despite this, Apple is likely to continue delivering over the long term and remains a stock that’s well worth tracking for speculative investors.