Apple Inc. experienced a 9% year-over-year decline in iPhone sales during China's 2026 618 shopping festival, despite regaining the No. 2 position in the market through steep discounts. According to Counterpoint Research, the sales drop occurred during the four-week promotional period as the company faced tougher comparisons against the previous year's aggressive promotions for the iPhone 16 series. The broader market also contracted, with total smartphone sales falling 13% year over year due to rising memory prices and reduced discounting.

Apple's Discounts Boost Market Share

To stimulate demand, Apple initiated promotions approximately a month before the festival, offering savings of up to 2,000 yuan (about $290) on the iPhone 17 Pro series. These incentives included official discounts, e-commerce platform offers, and trade-in deals. While these measures helped Apple climb to the second spot in China's smartphone rankings, the research firm noted that the gains came at the expense of pricing power. The year-over-year decline was attributed to the fact that Apple had run even more aggressive promotions for the iPhone 16 series during the prior year's event.

Market Slowdown and Huawei's Growth

The Chinese smartphone market faced broad headwinds during the period. Rising memory prices compelled manufacturers to increase device prices and scale back discounts, which dampened consumer demand in an already soft environment. Huawei emerged as the standout performer, becoming the only major smartphone brand to post year-over-year growth. The company captured a 21% market share, driven by strong demand for the Enjoy 90 Pro Max and solid performance from the Mate 80.

In contrast, other Chinese Android vendors, including OPPO, HONOR, vivo, and Xiaomi, all reported double-digit sales declines. Counterpoint Research noted that these manufacturers prioritized profitability over aggressive discounting strategies.

Outlook and Technical Analysis

Looking ahead, Counterpoint expects China's smartphone market to weaken further in the second half of 2026. Vendors and supply chain partners have indicated that higher prices are likely to persist as manufacturers continue to adopt a profit-first strategy and trim shipment plans. Consequently, the firm forecasts a double-digit decline in China's smartphone shipments for the full year.

Apple's stock technical indicators remain constructive. The shares are trading 6.8% above the 20-day simple moving average (SMA), 7% above the 50-day SMA, 13.6% above the 100-day SMA, and 16.2% above the 200-day SMA. The 20-day SMA remains above the 50-day SMA, while the 50-day stays above the 200-day SMA, reinforcing a bullish "golden cross" formation. Resistance is near $317.50, close to the 52-week high of about $317.40, while initial support sits around $287.50.

Earnings and Analyst Expectations

Apple is scheduled to report quarterly earnings on July 30. Wall Street expects earnings of $1.89 per share, up from $1.57 a year earlier, on revenue of $108.86 billion compared with $94.04 billion in the prior-year period. The stock currently trades at about 37.9 times earnings. Analysts maintain a consensus Buy rating with an average price forecast of $324.16. Recent analyst actions include Evercore ISI reiterating an Outperform rating with a $365 price target, KGI Securities downgrading the stock to Hold with a $315 target, and Bank of America maintaining a Buy rating with a $380 target.

Institutional investors are rotating capital away from semiconductor stocks and toward Apple Inc. and Palantir Technologies Inc., favoring businesses with clearer paths to monetizing artificial intelligence. This shift follows a period where substantial inflows into chipmakers propelled valuations, leading investors to seek companies with pricing power and recurring revenue models. The transition highlights a preference for sustainable earnings growth over the hardware-centric trade that dominated the early stages of the AI boom.

Technology-focused funds experienced $9.3 billion in outflows recently, marking one of the sector's largest weekly withdrawals this year, according to Deutsche Bank. However, the tech sector saw over $14 billion in inflows the subsequent week, indicating a rotation rather than an exit. Investor sentiment is also cautious on specific hardware names; Michael Burry recently disclosed bearish positions in Micron Technology Inc. and Caterpillar Inc., suggesting concerns that parts of the AI hardware trade have exceeded fundamental values.

Apple leverages pricing power

Apple is distinguishing itself by utilizing its brand strength to pass rising costs to consumers. CEO Tim Cook stated the company intends to increase prices for parts of its product line to cover expenses for sophisticated memory chips required for AI-enabled gadgets. This strategy aims to preserve profitability despite inflationary pressures and component cost increases.

Speculation regarding a potential manufacturing partnership with Intel Corp. has also influenced market sentiment. Although no agreement has been finalized, such a deal could diversify Apple’s semiconductor manufacturing and reduce dependence on overseas production. These factors have contributed to Apple's stock approaching its all-time high as investors view it as a mega-cap firm capable of benefiting from AI with lower valuation risk than chipmakers.

Palantir drives commercial revenue growth

Palantir is establishing itself as a leader in enterprise AI by generating actual income from its Artificial Intelligence Platform (AIP). The company is seeing demand from both commercial and government sectors, with analysts noting a 133% year-over-year increase in U.S. commercial revenue. This growth indicates that businesses are moving from AI experimentation to large-scale deployment.

The company’s customer base expanded by 42% compared to the previous year, driving its stock up nearly 15% over a five-day period to trade near $132. Strategic partnerships, such as the one with Zeta Global, and involvement in government initiatives like the U.S. Army’s Next Generation Command and Control modernization plan, are supporting this momentum. Analysts at D.A. Davidson recently upgraded Palantir to a Buy, while Wedbush maintained a bullish price target, suggesting AI adoption remains in early stages.

Market rotation favors commercialization

The current market movement suggests a differentiation among AI-related companies. While capital previously flowed indiscriminately into GPU and data center infrastructure providers, attention is shifting toward firms that can commercialize AI through software and services. Although semiconductors remain essential to the AI economy, investors are increasingly prioritizing earnings visibility and pricing rigor.

Apple and Palantir are positioned to benefit from this trend due to their financial resilience and revenue models. Apple possesses ecosystem strength and pricing power that few technology rivals match. Palantir continues to demonstrate the transition of enterprise AI from a speculative technology to a driver of recurring revenue. As institutional capital rotates through the technology sector, the focus is turning toward companies effectively converting artificial intelligence into durable business models.