Apple Inc. shares rose in Thursday's premarket trading, extending a rally that saw the stock hit a record high in the previous session. The gains followed investor enthusiasm for the new Siri AI beta and regulatory approval for Apple Intelligence in China. Apple is now exploring acquisitions of chip companies to strengthen its AI server processor efforts, as it faces performance challenges with its in-house M2 Ultra chips.

China Approval Clears Key Hurdle

The rally followed China's cyberspace regulator approving Apple Intelligence for the Chinese market. This approval allows Apple to roll out its on-device generative AI features using models from Baidu Inc. and Alibaba Group Holding Ltd. China requires companies to register large language models and generative AI services before public release. Alibaba confirmed its Qwen model will power Apple Intelligence across iPhone, iPad, Mac, and Vision Pro devices in China, while Baidu also confirmed its collaboration with Apple. The approval follows a reported 24.4% year-over-year increase in China shipments during the second quarter.

Chip Acquisitions to Address Server Challenges

Apple has approached chip startups about potential buyouts and spoken with bankers about possible deals to bolster its AI server processor capabilities. The company currently uses internally designed M2 Ultra chips for its in-house AI servers but has encountered performance issues. Apple had planned to launch its next-generation AI server chip, known internally as "Baltra," this year, but the project has been delayed. Earlier this year, Apple tested Alphabet Inc.'s Gemini AI models on its own servers for its Siri overhaul. However, the Mac-based chips could not handle the large model, forcing Apple to use NVIDIA Corp. chips through Alphabet's Google cloud infrastructure for parts of the revamped assistant.

Analysts Back AI Strategy

Deepwater Asset Management managing partner Gene Munster highlighted Apple's market outperformance, noting that the new Siri AI in the iOS 27 public beta provides concrete evidence of the company's AI capabilities. Munster stated the development resembles the setup that fueled Google's sharp rerating in April 2025. After testing the beta, he remarked that the experience is "like having a new phone." Separately, analyst Ming-Chi Kuo said the stock's climb aligns with his earlier forecast for a positive share-price trend in the second half of 2026.

Technical Analysis and Price Action

AAPL traded at $328.53, just below its 52-week high of $328.73, keeping the stock in breakout territory. The broader trend remains bullish, with the stock trading 8.8% above its 20-day simple moving average of $301.93 and 20.1% above its 200-day simple moving average of $273.43. The 20-day moving average remains above the 50-day moving average of $300.53, preserving the long-term golden cross formed in September 2025. Key support sits near $287.50. Apple shares were up 0.31% at $328.53 during premarket trading on Thursday.

Apple Inc. faces a potential 21% downside after KeyBanc Capital Markets downgraded the stock to Underweight from Sector Weight, establishing a $250 price target. The firm's analysis indicates that U.S. hardware demand is normalizing following last year's tariff-driven surge, creating a disconnect with consensus expectations for above-trend growth in the current fiscal third quarter.

KeyBanc's proprietary Key First Look Data (KFLD) revealed that indexed hardware spending fell 2% month-over-month in June, significantly missing the three-year average of +9%. While year-over-year spending improved to +4% from -6% in May, the June quarter (C2Q) showed a sequential decline of 2.7% and a year-over-year drop of 3%, contrasting sharply with the +6% growth seen a year ago.

Valuation and Pricing Concerns

The downgrade hinges on concerns that aggressive price hikes across iPad and Mac product lines are pushing demand into a zone where price elasticity exceeds one. KeyBanc notes that increases ranging from $100 to $200 on iPads, $100 to $300 on MacBooks, and $500 to $1,300 on Mac Studio risk losing more than one unit for every incremental dollar gained.

Despite management guidance for 14% to 17% total revenue growth in Q3, KeyBanc models hardware revenue growth of roughly 18% year-over-year. This growth is driven primarily by higher average selling prices rather than sustainable unit volume expansion.

Revised Growth Forecasts

KeyBanc projects iPhone revenue will rise 23.2% in FY26, outpacing the consensus estimate of 19.7%. However, the firm anticipates a sharp slowdown to 4.9% growth in FY27, compared to the Street's expectation of 8.3%. As hardware unit growth cools, the firm also reduced its Services outlook, modeling FY27 growth decelerating to 7% versus consensus near 12%.

The firm argues that Apple's current valuation multiples—approximately 24.5x FY27 EV/EBITDA and 35x forward earnings—are more than two standard deviations above the S&P 500 and Nasdaq. These levels are deemed unsustainable for a maturing hardware and services narrative characterized by slowing growth.