Apple Inc. (AAPL) shares edged down 0.2% to close at $298.21 on Thursday, pulling back from an intraday high of $300.45 after news broke that OpenAI is weighing legal action over a deteriorating partnership, according to a Reuters report. The stock had briefly touched the $300 mark for the second time this week, falling short of its May 13 peak of $300.92.
The retreat comes at a delicate moment for the tech giant, which had been regaining momentum on the back of robust iPhone sales, record Services revenue, a massive $100 billion share repurchase program, and growing anticipation for a clearer AI strategy at next month's Worldwide Developers Conference (WWDC).
According to a source cited by Reuters, the two-year-old collaboration between Apple and OpenAI has soured, with the ChatGPT developer now exploring legal action, potentially over a breach of contract. Apple has not responded to requests for comment. The news reignited investor concerns about Apple's reliance on external AI partners as it works to enhance Siri and other features. Reports indicate Apple is also testing Google's Gemini and Anthropic's Claude for a more capable Siri upgrade expected later this year.
The broader market, however, showed resilience. The S&P 500 and Nasdaq Composite both closed at record highs, buoyed by strength in the technology sector. Nvidia (NVDA) surged 4.4% after the U.S. government approved its H200 chip sales to Chinese companies. "How much longer this rally can continue is the question," remarked Robert Pavlik of Dakota Wealth, as cited by Reuters.
Despite the day's dip, the bull case for Apple remains intact. Evercore ISI analyst Amit Daryanani raised his price target on Apple to $365 from $330, citing consistent earnings, strong free cash flow, resilient Services revenue, and growing demand for premium iPhones, as reported by Barron's. Daryanani also expects Apple to unveil a more personalized Siri at WWDC.
Apple's fiscal second-quarter results provided ample fuel for optimism. Revenue surged 17% year-over-year to $111.2 billion, while diluted earnings per share climbed 22% to $2.01. CEO Tim Cook described the quarter as the "best March quarter ever." The board also authorized an additional $100 billion in share buybacks, further reducing the share count.
However, the quarter was not without challenges. Cook noted that iPhone demand was "off the charts," but flagged "significantly higher memory costs" that could pressure margins even amid strong sales. iPhone net sales jumped 22% to $56.99 billion, while Services revenue rose 16% to $30.98 billion, with Services gross margin reaching an impressive 76.7%—well above Apple's overall gross margin of 49.3%.
Macroeconomic headwinds persist. Interest rate expectations remain elevated, with Polymarket traders assigning a 98% probability that the Federal Reserve will hold rates steady in June and a 72% chance of no rate cuts at all in 2026. Higher-for-longer rates typically weigh on growth stocks like Apple, whose valuations depend heavily on future earnings. Meanwhile, U.S. retail sales rose 0.5% in April, but higher import prices and stubborn inflation keep the Fed on hold, according to Reuters. BMO's Sal Guatieri noted that a "powerful equity market rally" is fueling spending among upper-income households.
Looking ahead, the risks are becoming more pronounced. A formal legal dispute with OpenAI, a lackluster AI showcase at WWDC, or another spike in memory costs could quickly derail the rally. For now, Apple shares remain near their highs, supported by steady iPhone sales, fat Services margins, and hefty capital returns—but the AI cloud is growing darker.
