Supreme Court Tariff Ruling Offers Modest Relief for Apple, But Core Risks Persist

What happened

The Supreme Court has struck down tariffs enacted under President Trump, which Apple cited as a headwind in recent filings. Apple incurred over $3 billion in tariffs since these policies were implemented, adding to its cost burden. This ruling could allow Apple to source more U.S.-bound products from China at lower rates, potentially reducing future tariff expenses. However, the DeepValue report highlights that Apple's gross margins face downward pressure from multiple factors, including tariffs, regulation, and pricing, with explicit warnings in SEC filings. While this development may ease some cost pressures, it does not address the critical overhangs of AI Siri execution risk and EU DMA remedies that dominate the investment thesis.

Implication

In the short term, the removal of tariffs may lower Apple's product costs, potentially improving gross margins by a few basis points and supporting the base scenario of stable margins. This could offer minor earnings upside, but the impact may be offset by ongoing competitive pricing pressures and mix shifts highlighted in filings. Investors should recognize that the ruling does not mitigate risks from the EU DMA, which could still materially affect Services economics and overall profitability as noted in the DeepValue report. Additionally, the AI Siri rollout remains a key thesis breaker, with delays potentially overshadowing any benefits from reduced tariffs. Therefore, while the news is positive, it's insufficient to change the current 'WAIT' rating without further evidence on AI execution and regulatory outcomes.

Thesis delta

The Supreme Court's decision reduces one source of gross margin pressure by potentially lowering tariff costs, which could provide a slight upside to Apple's earnings in the near term. However, the core investment thesis remains unchanged, as the key overhangs—AI Siri shipping proof and EU DMA remedies—are still unresolved and critical for valuation, as emphasized in the DeepValue report. This news might offer temporary relief but does not alter the need for observable milestones in AI and regulation to de-risk the stock.