Cupertino-based tech giant, Apple Inc., has witnessed a staggering loss of $200 billion in market valuation over the past two days as reports surface that China is contemplating banning government employees from using iPhones for work-related purposes. The news sent shockwaves through the global market, further exacerbating Apple’s ongoing struggles in the face of various challenges, both domestic and international.
Apple’s shares experienced a sharp decline of up to 5.1%, extending its two-day slump to 6.8%. This dramatic plunge is significant, given Apple’s status as the largest component in major U.S. equity indexes. These losses contribute to the broader selloff that has been partly ignited by a series of concerns emanating from China.
China, the world’s second-largest economy, has been grappling with an extended crisis in its real estate sector, causing ripples across various industries, including commodities and consumer electronics. Apple, which relies heavily on China as its biggest foreign market and a crucial global production base, has been profoundly affected by the economic slowdown in the region.
Adding to Apple’s woes, rising U.S. Treasury yields and concerns about the Federal Reserve’s potential actions to combat inflation amid the resilient U.S. economy have added to market jitters.
The ramifications of these developments have reverberated across the financial markets, with investors offloading shares in sectors ranging from semiconductor companies to mega-cap technology firms, including U.S.-listed Chinese stocks. Edward Moya, Senior Market Analyst at OANDA, pointed out, “The Nasdaq is sinking as one bad Apple spoils a bunch of mega-cap tech stocks.” Moya also highlighted that Apple’s growth prospects are closely intertwined with China, and any escalation in the Beijing crackdown could pose a substantial challenge to other mega-cap tech companies relying on the Chinese market.
The Nasdaq 100 Index, dominated by tech stocks, dipped by approximately 1%, while the Philadelphia Semiconductor Index, comprising several Apple suppliers, experienced a 2.5% decline on the same day.
One notable observation made by Bank of America Corp. analyst Wamsi Mohan is the “interesting timing” of China’s potential ban. This announcement comes hot on the heels of the recent launch of Huawei Technologies Co.’s high-end 5G-capable smartphone. Analysis indicates that Huawei appears to be making early strides in circumventing U.S. efforts to contain its growth, with its Mate 60 Pro being powered by Semiconductor Manufacturing International Corp.’s 7nm chips. This development underscores China’s determination to reduce reliance on American technology.
Should Beijing proceed with the ban, it could have far-reaching consequences for several other U.S. technology companies that depend on sales and production within China. Apple suppliers worldwide experienced declines in their stock prices as multiple reports confirmed China’s impending policy change.
Nonetheless, some bullish analysts, like Daniel Ives from Wedbush Securities, argue that the impact of an “iPhone ban is way overblown.” Ives, who maintains an overweight rating on Apple stock, believes it would affect less than 500,000 iPhones out of the roughly 45 million expected to be sold in China over the next year. He also highlighted that despite the challenges, Apple has made significant market gains in the Chinese smartphone sector.
Apple’s tumultuous two-day decline in valuation, coupled with the potential iPhone ban for Chinese government employees, underscores the tech giant’s vulnerability to evolving global dynamics. As China’s economic challenges persist and geopolitical tensions continue to play out, Apple and its investors face a complex and uncertain landscape.