Apple’s (AAPL) long-standing reliance on China for both manufacturing and consumer demand has sparked concern among investors and analysts. With rising geopolitical tensions and tariff escalation, many people wonder if Apple can continue to grow in a world where its relationship with China is becoming more strained. 

This negative sentiment has weighed on Apple’s stock this year. Compared to the other Magnificent 7 stocks, Apple’s shares are down 15.7% year to date, trailing the tech-heavy Nasdaq Composite Index’s ($NASX) 6.5% gain. 

However, while Apple’s China risks are real, I believe the overall picture is far more bullish. Let’s dig deeper to find out more.

Apple’s Performance Amid Headwinds

Apple’s ecosystem is vast and increasingly sticky. It develops, manufactures, and markets consumer electronics, software, and digital services. Apple is well-known for its flagship products including the iPhone, Mac, Apple Watch, iPad, and Apple TV+, among others. Rising U.S.-China tensions continue to create uncertainty, particularly regarding tariffs. 

CEO Tim Cook acknowledged that, while tariffs had “limited impact” in the March quarter, estimates suggest they could add $900 million to Apple’s costs in the June quarter, assuming current global trade policies remain unchanged. 

Apple is also under increasing pressure in China’s consumer market. Consumer trends favoring domestic brands, government restrictions on iPhone use by state employees, and fierce competition from Huawei’s high-end smartphones are all legitimate threats. Historically, China has accounted for nearly 20% of Apple’s revenue, and even minor disruptions can have a significant financial impact.

Despite the headwinds, Apple reported $95.4 billion in revenue in Q2 of fiscal 2025, up 5% year over year, and set records in markets far beyond China, including the U.K., India, Brazil, Poland, and the Philippines. This quarter, Apple’s artificial intelligence (AI) strategy took center stage. With iOS 18, the company introduced Apple Intelligence, a tightly integrated layer of generative AI features for the iPhone, iPad, Mac, and Vision Pro. 

While wearables revenue fell 5% in the first quarter, Apple’s hardware portfolio remained robust. iPhone revenue increased 2% to $46.8 billion, driven by the new iPhone 16e and feature-rich iPhone 16 Pro models. These devices feature the A18 and A18 Pro chips, which bring new energy efficiency and AI capabilities to the forefront.

Global Diversification: A Quiet But Powerful Shift

While Apple’s exposure to China may pose risks, the company’s global innovation engine, strategic diversification, and constant focus on user experience are driving a larger transformation that many in the market underestimate. Many investors are missing out on Apple’s subtle but significant shift toward diversification, not just in where it sells products, but also in where it manufactures them. 

Cook noted that most iPhones sold in the U.S. this quarter will be assembled in India, while Vietnam now manufactures the majority of iPads, Macs, Watches, and AirPods for the U.S. market. The company is also expanding its presence in India, with plans for new retail stores and increased iPhone assembly operations in collaboration with Foxconn. India is more than just a manufacturing hub; it is also a growth market, with Apple reporting record sales in the region. 

Furthermore, Cook stated that Apple is increasing domestic investment in the U.S., with plans to spend $500 billion over the next four years, expanding facilities and teams in Michigan, Texas, California, Arizona, and elsewhere. Apple is even establishing a new facility in Texas for advanced server manufacturing. Apple now sources chips from a dozen U.S. states and works with over 9,000 American suppliers. Advanced chips made in Arizona and glass sourced from American manufacturers are part of a larger strategy to reduce China-related supply chain risks. While investors focus on tariffs and tensions, Apple is preparing for its next era of growth with Apple Intelligence, a suite of generative AI features and tools. 

In fact, Services revenue reached an all-time high of $26.6 billion, up 12%. From Apple TV+ to Apple Pay, Fitness+, and the App Store, Apple is developing recurring revenue streams that are less vulnerable to hardware cycles and international friction. Despite global volatility, Apple continues to reward shareholders. In the second quarter, it repurchased $25 billion in shares and paid out $3.8 billion in dividends. The board also approved a new $100 billion repurchase plan and increased the dividend by 4% to $0.26 per share, marking the 13th consecutive year of dividend growth. Apple ended the quarter with $133 billion in cash and securities and $98 billion in debt.

Analysts predict modest revenue growth of 4.2% for the full fiscal year 2025, reaching $407.7 billion, with an additional 5.9% increase in fiscal 2026. Earnings are expected to rise 6.5% in 2025 to $7.19 per share, followed by a 9.3% increase in 2026. Apple stock appears to be slightly pricey, trading at 27x forward 2026 earnings. 

What Does Wall Street Say About Apple Stock?

On Wall Street, Apple stock holds a “Moderate Buy” rating. Among the 37 analysts covering the stock, 18 recommend a “Strong Buy,” three rate it a “Moderate Buy,” 14 suggest a “Hold,” and two advise a “Strong Sell.” With an average price target of $230.92, analysts project potential upside of around 9% over the next 12 months. The highest price target is $300, indicating the stock could rise as much as 42% from current levels.

The Key Takeaway: Apple Is Playing the Long Game

Apple’s risks in China are real. Tariffs may hurt, and geopolitics may shift, as competition in key markets heats up. However, Apple’s success is not limited to a single country. As Tim Cook put it, Apple remains “confident that we can continue to run our business in a way that has always set Apple apart.” While many people are fixated on quarterly iPhone shipments in China, they are missing the bigger picture: Apple is transitioning from a premium device manufacturer to a vertically integrated tech empire with AI, content, payments, services, and sustainability at its root, making it a great long-term investment.