London Company’s Q1 letter flags Apple as a “detractor” despite strong results, pointing to AI cost worries

Apple shares slid even as the company turned in what The London Company Income Equity Strategy characterized as strong performance, according to the firm’s latest first-quarter 2026 investor letter.

The London Company, an investment management company, discussed Apple in the context of a choppy early-2026 market. It cited a broad decline in US equities after the year began with a rally, saying sentiment reversed sharply in March amid the Iran conflict, and that sector leadership narrowed to “commodity-focused” areas. In that environment, the letter said energy outperformed while large-cap growth faced double-digit losses, with weakness linked to “Big Tech and AI-related concerns” in software.

Within that market narrative, The London Company’s letter said Apple was a “detractor despite strong results.” It attributed part of the reaction to investor sentiment rather than to deterioration in Apple’s execution. The firm highlighted record iPhone revenue, but noted demand was “partially constrained by supply,” suggesting the company’s product momentum was strong even if delivery capacity limited some buyers.

The letter also pointed to what it called rising AI costs, including higher memory costs, as the main driver of how the stock was trading. In The London Company’s framing, the market response reflected an emphasis on cost pressures connected to AI rather than on Apple’s core business strengths. The firm said this created a “disconnect from fundamentals.”

In particular, The London Company emphasized Apple’s ecosystem strength, pricing power, and capital discipline, arguing those factors remain intact. The letter said it expects continued iPhone momentum as part of that fundamentals case, while the market remains preoccupied with AI spending and supply-chain cost dynamics.

The investor letter did provide some Apple-specific reference points as of June 9, 2026, saying Apple closed at $290.55 per share. It also cited a one-month return of -2.78% and a 52-week gain of 46.17%, along with an estimated market capitalization of $4.27 trillion.

More broadly, the letter argued that sector dispersion was extreme during the period, which helped explain why stocks tied to energy, agriculture, and hard assets rallied while technology faced greater pressure. For Apple, that meant the company’s fundamentals were being measured against a macro-and-sector backdrop that favored different parts of the market.

The report did not outline new Apple guidance, operational changes, or updated financial forecasts in the excerpts available, so it remains unclear how much of the “AI cost” concern is tied to near-term expectations versus longer-cycle assumptions. It also did not specify the degree to which iPhone supply constraints were easing or how investor perceptions might change if AI cost estimates stabilize. Investors will likely focus next on Apple’s own disclosures around product demand, supply performance, and any AI-related spending cadence.

As for what to watch, the letter’s emphasis suggests traders may continue to treat Apple’s valuation as sensitive to updated expectations for AI-related input costs, particularly memory. At the same time, Apple’s reported iPhone momentum and capital returns may reassert themselves if market sentiment shifts back toward consumer-device fundamentals rather than AI cost narratives.