Apple has been hit with another blow, with Wall Street firm Needham downgrading its stock from Buy to Hold, citing competitive threats in AI and a weak outlook for iPhone upgrades.

Analyst Laura Martin warned investors that Apple’s growth prospects are under pressure, with the company now trading at an “expensive” valuation compared to peers like Microsoft, Amazon, and Nvidia.

Apple’s share price is down 19% this year, making it the worst performer among the so-called “Magnificent Seven” tech giants.

“For this stock to work, it must have the catalyst of an iPhone replacement cycle, which we do not foresee in the next 12 months,” Martin wrote. She also raised concerns about Apple’s lag in generative AI, saying new hardware innovations from rivals could threaten iOS’s market dominance.

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Apple’s iPhone 17 lineup is expected later this year, but that may not be enough to offset broader challenges. Counterpoint Research also slashed its global smartphone shipment forecast this week, pointing to weak demand and geopolitical uncertainties, including US tariff threats.

Adding to investor anxiety, Apple lacks a competitive large language model and does not generate cloud revenue from AI like Google or Amazon. Martin argued this puts the company at a disadvantage in the AI race.

The downgrade follows similar moves from Jefferies, Loop Capital, and others earlier this year, contributing to Apple’s fall from favour on Wall Street. Fewer than 60% of analysts currently rate the stock as a buy.

All eyes are now on Apple’s Worldwide Developers Conference next week, where the company is expected to reveal new AI features and potentially a long-rumoured partnership with Google.