The Wall Street Journal has been publishing daily articles regarding Apple’s recent battles with regulatory bodies, summarized below.

Memorial Day weekend saw an acceleration of tariffs, with President Trump threatening a 50% tariff on goods imported from the European Union and a tariff of at least 25% on iPhones not manufactured in the U.S. Accordingly, Apple shares fell 3% on Friday, now 25% below its peak, while the stock market indexes fell between 0.6% and 1%. According to the President’s original announcement, trade negotiations with the EU have been lackluster, and he expects iPhones to be manufactured and produced in the United States. Since the announcement, EU Trade Commissioner Maroš Šefčovič has affirmed that the EU is “committed to securing a deal that works for both sides,” and President Trump has since delayed the implementation of tariffs until July 9 to allow more time for negotiations.

Despite the President’s demands, technology experts have said that manufacturing the full stack of iPhone components in the U.S. would be challenging and costly. iPhones contain many sophisticated parts, sourced from many countries, and assembled primarily in China. Analyst estimates suggest that domestic iPhone production could push the retail prices to upwards of $3,500 and take up to a decade to fully implement. In response, Apple has aggressively shifted production to India which now handles over 50% of new iPhone manufacturing. This move aligns with the potential upcoming U.S.-India trade deal as India also offers strong engineering talent and an improving supply chain. Apple also faces legal and regulatory challenges, with CEO Tim Cook facing off against state and federal lawmakers, worldwide regulators, and two U.S. judges. State and federal lawmakers threaten legislation that would require Apple to verify user ages in app store purchases, which could limit teen spending. U.S. judges overseeing an antitrust case against Alphabet’s Google may rule that the search giant must terminate their $20 billion annual contract with Apple to be the default search engine in safari, another blow to revenue. At the same time, Apple is under competitive pressure as rivals make quicker advances in artificial intelligence. Apple is not expected to make any AI breakthroughs in the near term, as Cook said on Apple’s recent earnings call that the company has not yet delivered a more personalized Siri assistant using AI because current testing does not meet Apple’s “high-quality” standard. However, history shows that Apple did not produce the first music player, nor the first smartphone, but the company’s ability to adapt and innovate has proven successful in their long-term performance. As outlined by the Wall Street Journal, the extent of the recent downturn in Apple shares does not indicate that the company expects to be subjected to the 25% tariff. Rather, the market has concluded that this “is just a negotiation.”

On the Artificial Intelligence front, recent developments from the Saudi-U.S. Investment Forum, as well as information from Nvidia’s recent earnings call highlights that the “AI race” is only accelerating.  On May 13^th, President Trump was accompanied by an entourage of American CEOs at the forum hosted in Riyadh, Saudi Arabia, which announced a $600 billion investment deal between the United States and Saudi Arabia. The deal includes several partnerships between Saudi and US companies to build and invest in “AI data centers and energy infrastructure.” Companies like Nvidia, Advanced Micro Devices, Amazon, Oracle, Uber, Qualcomm, Google, and Boeing secured multi-billion-dollar deals. Wall Street has interpreted this move as solidifying a strategic relationship between the U.S. and Saudi Arabia, opening doors for future investments and further growth, and steering Saudi Arabia away from China.

Additionally, on May 28^th, Nvidia released earnings that showed data center revenue surge 73%, overall revenue grow by 69%, and gaming revenue beating estimates by 33% despite Washington’s new restrictions on chip sales in China. Across multiple fronts, capital spending on AI infrastructure remains robust, and companies like Microsoft, Amazon, Alphabet, and Meta have recently affirmed plans to, yet again, boost spending on AI. The Wall Street Journal expects capital spending on AI infrastructure from those four companies alone to grow 41% to $345 billion this year.

Looking at the broader stock market, first quarter earnings of the S&P 500 prepared by FactSet doubled original estimates (13.6% actual compared to 6.7% estimated), employment remains strong, and progress on inflation remains positive. We continue to expect positive returns from equities during 2025.

At Worcester Advisors, we continue to recommend investment in well diversified portfolios of high-quality companies with consistent earnings growth as the safest method of achieving capital growth.

Your team,

Dave, Joe, Sangam, Jake, Anton, & Sandhya