Apple's China Sales Plummet Amidst Trump Tariffs and AI Disappointment

Apple's sales in China have witnessed a significant decline of 11% in the first quarter of its financial year, falling from $20.8 billion to $18.5 billion. This missed Wall Street estimates by a wide margin, despite analysts expecting a recovery.

Contributing to the slump, the company's iPhone revenues also experienced a slight decline, contrary to expectations of growth. Apple's new artificial intelligence (AI) service, Apple Intelligence, has failed to impress consumers.

Furthermore, lackluster sales of the iPhone 16 dragged down the smartphone division. Despite this, the MacBook and iPad divisions exhibited growth.

Apple reported overall revenues of $124.3 billion for the Christmas quarter, a record according to CEO Tim Cook. However, shares of the world's most valuable company briefly dropped around 1.5% in after-hours trading before partially recovering.

The unexpected decline in China extends the company's challenges in the country, where it faces intense competition from domestic rival Huawei.

President Donald Trump could exacerbate Apple's difficulties. He has reportedly considered imposing 10% import tariffs on Chinese goods, which, while lower than the 60% previously suggested, would still impact global tech giants like Apple.

Apple relies heavily on China for its supply chain and manufacturing, despite efforts to shift production to India and Vietnam. It also faces the potential for retaliation from Beijing or a consumer backlash.

Amidst these challenges, Apple's results coincide with a broader sell-off in technology stocks. Fears that China is catching up in AI development have led to a decline in major tech stock valuations.

Despite the market turbulence, OpenAI, the company behind ChatGPT, is reportedly raising around $40 billion in funding, valuing it at a potential $340 billion.

Apple's efforts to incorporate AI into its iPhones have been met with negative reviews due to bugs and glitches, including false news headlines. The company was forced to suspend AI-powered news alerts after errors were reported by the BBC.