Apple Makes Core Changes

Apple makes changes to its core: how its new CEO will impact the share price There was big news this week for Apple, Tim Cook will be stepping down as CEO after 15 years, passing the reigns to John Ternus, who is an Apple veteran and has been with the company since 2001. He cites Steve Jobs as his original mentor, and has overseen the hardware development for the company, including AirPods, iPads and the most recent iPhone models. His background is in engineering, and this could be significant for the direction of the firm. It is expected that Ternus, an Apple veteran, will want to put his mark on the company. His background suggests that the one way he could do this is through updating and differentiating existing Apple products. In recent years, Apple has come in for criticism from some in the market who query the delay in releasing new products.

Ternus may want to turn the company into an innovative product design powerhouse, like it was under Steve Jobs, and we could see change to the product line and product offering in the coming months and years. It is also worth noting that Ternus’s leadership style is expected to be very different from Tim Cook’s. Cook was a steady pair of hands, who took few risks and was unwilling to dive headfirst into the AI revolution, unlike some of Apple’s peers. Cook concentrated on services and subscription building that was generated from Apple’s existing products. His strategy was undoubtedly a success, under Cook’s tenure, Apple’s market capitalization surged to $4 trillion dollars, and it is the world’s second largest company behind Nvidia. However, while Ternus wants to build on Cook’s success, he may have more of a risk-taking mentality, and might have more in common with Steve Jobs than his predecessor.

What is likely to change at Apple?

Ternus’s immediate focus is expected to be AI. He may want to take initial steps to show that Apple is not falling behind in the AI race. To do this he may accelerate the production of AI wearables, which have been spoken about since the start of this year.

This includes smart glasses, a pendant, and AirPods with cameras, which will all be powered by Siri. The contrast between Apple’s spending on AI and its peers is stark. Apple is in a totally different league compared to Amazon, Alphabet and Meta. In its fiscal year 2025, Apple spent $12.7bn on capex, which includes AI, in contrast the hyperscalers are spending many times this amount. Microsoft, Meta, Amazon and Alphabet are expected to collectively spend over $470bn in capex in 2026, up from $350bn in 2025. Apple’s model is fundamentally different from the hyperscalers, it’s not a cloud provider, so it does not need to build data centres, unlike Amazon and Microsoft.

In the past, its strategy has been to partner up with AI technology companies, including OpenAI, and Google’s Gemini, rather than build out its own infrastructure, which is a less costly way to get exposure to AI capabilities. However, the pace of investment is extremely slow compared to its peers, and some of its in-house AI tools have failed to win over customers.

Can the new CEO boost Apple’s AI ambitions?

Ternus is under pressure to show that the company can deliver AI features, which customers are starting to expect in their tech products. About two thirds of Americans now use AI and customers see AI tools as convenient, and increasingly easy to use. Customers do worry about the impact of AI, and most Americans prefer to engage with a human agent, rather than an AI agent. However, the risk for Apple is that its competitors deliver genuinely useful and well-liked AI features, while it is still using its old Siri model. While Apple has pledged that it wants to do AI both well and safely, there is still a concern that Apple could underwhelm investors, which Ternus will want to address at the start of his tenure.

The company will report earnings on 30th April, and we may hear more about the transition of Tim Cook from CEO to executive chair, we may also get some hints about Ternus’s vision for the future of Apple. However, Ternus does not take over until 1st September, so we may need to wait until then to hear substantiative detail about new products and the future strategy for the company. Ternus may want to start with a bang, but investors may have to wait until Q3 and Q4 to find out how he will shake things up at Apple.

The market impact

The share price had a muted reaction to this news and is moving higher along with the tech sector in the US, which is the top performing sector in the US equity market for April. Tech stocks are back in demand since the US/ Iran ceasefire and that is a bigger driver for the Apple share price compared to news about the change in CEO. The market may see the change in CEO as a highly stage-managed affair, that will be as seamless as possible without threatening the share price or Apple’s market cap.

If the market sees Ternus as turbo charging Apple’s AI capabilities to catch up with its peer group, then the stock price could have further to run. It has risen 7% in the past month, compared with an 11% gain for Meta and 12% gain for Microsoft. The stock price is close to all-time highs, and if it can keep pace with the tech sector, then fresh records could be on the way.

Chart 1: Apple, 12-month chart

Source: XTB

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