Apple is no longer No. 1 in smartphones. Here's why that may not matter

Published Mon, Apr 15 202412:38 PM EDT

New data showing a sharp decline in iPhone shipments due to weakness in China is unwelcome news for investors in Apple. That may not matter much, though, if it delivers on AI. Sluggish iPhone sales this year have been well documented, and they're the reason Apple shares have fallen roughly 9% in 2024. First-quarter numbers from International Data Corporation (IDC) show the extent of the weakness, with iPhone shipments dropping 9.6% year-over-year to 50.1 million units — its sharpest year-over-year loss out of the top five smartphone brands. That put Samsung back in first place for phone shipments, after Apple held the crown for all of 2023 . Apple saw its worldwide market share drop by more than 3 percentage points to 17.3% as Chinese rivals gained ground and customers in the region turned to cheaper homegrown alternatives. While Samsung was No. 1 with 60.1 million first-quarter shipments, that number was slightly lower than last year and its market share dropped more than 2 percentage points. "Yes, iPhones are weak. But as long as we see announcements around AI into new iPhones, people will be willing to look past sluggish sales," Club Director of Portfolio Analysis Jeff Marks said during Monday's Morning Meeting. Wall Street is looking at Apple's Worldwide Developers Conference (WWDC) in June as the time and place where such announcements could be made. Shares of Apple were down after the IDC data came out. The report comes after the stock's 4.3% gain on Thursday, its best single-session advance since last May, and nearly 1% rise on Friday even as the tech-heavy Nasdaq dropped 1.6% in a broad market sell-off. Perhaps, it's not surprising to see some profit-taking to start the new week. However, Apple has been a huge laggard compared to our five other Super Six stocks — Alphabet , Amazon , Meta Platforms , Microsoft and Nvidia . They have all been strong market leaders. AAPL YTD mountain Apple YTD Echoing Jeff's remarks, Jim Cramer has advised members to have patience and "own, don't trade" Apple stock despite these headwinds overseas. He also said that AI-integrated features in the iPhone could boost the next upgrade cycle and help Apple get back on track for both sales and its lagging stock performance. JPMorgan said AI-enabled iPhones could lead to a refresh similar to when 5G was first put into the iPhone 12 in October 2020. The Club said that's a perfect example of why AI-enabled devices will drive new users to Apple's ecosystem and also motivate current users to trade up. In further upbeat signs about Apple, Bloomberg reported last week that the company is preparing for AI-focused M4 chips in new Mac laptops. Jim said Thursday that investors "need to have faith because this [management] team will have something great." While Apple hasn't confirmed this report, Jim speculated, "If they can put these AI chips in the Mac, then they can do it on the iPhone." (Jim Cramer's Charitable Trust is long AAPL, AMZN, GOOGL, META, MSFT, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A person poses holding the original iPhone and the new iPhone 15 outside the Fifth Avenue Apple Store in New York City ahead of the launch of Apple’s new iPhone 15, Sept. 22, 2023.

Alexi Rosenfeld | Getty Images