Apple stock will see little impact from EU probe: Analyst

The European Union has charged Apple (AAPL) under its Digital Markets Act, which could result in serious fines. The bloc alleges that the tech giant's App Store practices prevent app developers from directing consumers to cheaper services. TECHnalysis Research president and chief analyst Bob O'Donnell joins Market Domination to give insight into Apple's dealings with the EU's regulatory body and its investments in artificial intelligence.

O'Donnell explains that the investigation is unlikely to conclude anytime soon: "There's no official word on part of this until March of 2025, so nothing right away," the chief analyst says.

He argues that any stock reaction to the news may be premature, particularly given Apple's incentives to make changes: "I do think Apple is going to have to make some tweaks, some things that they don't necessarily want to do, but at the end of the day, again, it's an important enough market that they're going to have to follow some of these requirements that the EU is putting into place. And therefore, long term, I don't think the impact is that big of a deal as far as the value of the company and the way people view the stock."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video transcript

As Apple has set its sights on A I growth, the European Union has its sights set on the tech giant itself, charging the company for failing to comply with a digital competition law.

Good to take a bite into what's ahead for Apple for this and more.

Let's get to Bob o'donnell Technos research president and chief analyst.

Good to see you, Bob.

Thanks for being here.

So let's get to that EU law first, right?

Because this is the first case that we have seen been brought as part of this Digital Markets Act.

It has to do specifically with what the EU is charging is unfair restrictions on developers in the App store.

How and it could result in a fine for Apple.

How seriously should folks be taking this?

Well, I mean, look, Julie, it's going to take a while before any of this hits.

I mean the they announced that we're looking at it, they opened the investigation in March.

They give themselves a year which means there's no official word on part of this until March of 2025.

So nothing right away.

But look, I mean, Apple made some changes at the beginning of the year in reaction to, you know, the changes that we knew were coming here in the EU.

Uh but there were a lot of people saying, look, you may have followed the letter of the law but not the spirit of the law.

And I think that's what's kind of coming back to them is people saying, look, you know, you're not really making it easy for the smaller developers to really be able to get access to this huge bounty of, of iphone um users, you know, and, and Europe is about a quarter, last quarter, it was about 25 percent of Apple's earnings.

So this is a big market for Apple.

And you know, Europe is setting the standards as far as how companies have to think about providing access to alternatives, like, you know, different app stores and things like that.

Apple's always wanted to keep a closed garden, they've done it very successfully up till now.

But the eu is basically saying, no, you got to open it up a little bit more and not just exactly to the letter of the law but to the spirit as well.

And I think that's essentially what the concern is.

And, and Bob though, you look at investors how they're reacting.

I mean, they are taking this in stride.

I mean, Apple is actually up about 7/10 of a percent in today's trade.

Do you think investors, Bob are they, are they being too complacent or no.

You think ultimately this is gonna work out?

Apple is gonna, at the end of the day, make some tweaks that in some way, make regulators and investors happy.

Uh You know, I think it's a little bit of both, Josh, I mean, bottom line is, again, it's gonna take a while before anything immediate happens.

So to react to the price to the stock today seems like it would be a bit much.

Uh I do think Apple is going to have to make some tweaks, some things that they, they don't necessarily want to do.

But at the end of the day, again, it's an important enough market that they're going to have to follow some of these requirements that the eu is putting into place and therefore long term, I don't think the impact is that big of a deal as far as uh the value of the company and the way people view the stock, I think there are other issues are going to be important for Apple to deal with uh in Europe.

And of course, this whole idea that they're not gonna bring their Apple Intelligence features, their new A I stuff to Europe looks to be very interesting.

You have to wonder, you know, is there a little bit of chicken going on here?

Like, hey, if you're gonna take this away from us, then we're gonna keep some of these features away from people in Europe, you know, I don't know for sure that's really the case, but you got to wonder if that goes into some of these decisions.

Right.

And there has been some reporting to that effect, Bob, let's talk about then the other sort of related story related because if they're holding back on a if features and that's that they are looking to potentially partner with meta, looking at A, I now, I don't know if this is a big shock that Apple sort of is casting a wide net when it comes to its A I development.

What do you think?

Well, you know, the biggest shock honestly was the fact that Apple brought in anybody.

And then, you know, of course, they announced with open A I as being integrated into Siri uh which is very interesting because, you know, the implications of that are that the entire Siri experience isn't controlled by Apple.

I mean, of course, yes, they give you the warnings, et cetera, et cetera.

But I think, you know, there's a couple of things going on number one immediately, even at the event itself.

They admitted, yeah, we're talking to Google too as some of the reporting that, you know, um we've seen other people talk about say and then so it's not a surprise at all that they're gonna talk to meta and some of these other big A I firms.

The bigger question to me is how is that gonna actually play out if I'm an end user and I'm using these Apple devices and I want to use these Apple intelligence features.

Will I make my choice between, you know, chat GP open A is chat GP T and Google Gemini Pro and uh the meta Lama stuff or is that gonna be a little bit controlled by Apple or will it be region by region?

I mean, you know, Apple's install base being as large as it is any service that gets access to that install base, it's a huge benefit to them.

So, you know, Apple knows how valuable that is.

And I think they're going to be very cautious in the manner with which they deliver those capable and in which companies are going to benefit from that.

So that's, you know, my my big question mark there is like, hey, how is this actually gonna work?

And, and then again, ultimately down the road, are there gonna be payouts involved initially?

Of course, there was reported that there aren't going to be any, but all these things can change.