Apple warns of severe product shortages amid surging demand and EU AI talks

Apple has cautioned Wall Street that it faces severe product shortages in the coming months, affecting its Mac, iPhone, and iPad lines. Outgoing chief executive Tim Cook stated that the company has limited flexibility to resolve the bottleneck, warning of a difficult period ahead for its manufacturing operations.

While the shortage involves critical microprocessor components with advanced nodes primarily manufactured by Taiwan's TSMC, Cook emphasized that the root cause is unexpectedly high consumer demand rather than traditional supply chain failures. Sales of Mac and iPhone devices surged by 25% and 22% respectively in the June quarter, driven by the record-breaking launch of the iPhone 17.

"This is not a regular supply issue, it's a demand forecast issue to be candid," Cook told investors, adding that the company will be "scrambling on the supply side" in the upcoming quarter. For investors, this warning signals that unexpected consumer demand is currently outpacing the company's ability to manufacture its most popular devices.

Despite the production scramble, Apple's financials received a boost from roughly $1.1 billion in tariff refunds, which expanded its gross margin by 2% over the last three months. Cook confirmed the company intends to reinvest these refunds into the United States, contributing to a previously announced $600 billion domestic manufacturing expansion over the next four years.

Beyond hardware, the company is preparing for the public relaunch of its Siri artificial intelligence assistant, which Cook described as a strategic "competitive weapon" due to its ability to run directly on devices. However, European users may face delays, as Apple remains in ongoing negotiations with European Union authorities to ensure the new software can be released "to everyone, everywhere at the same time."

The production warnings from Apple contrast sharply with the financial results of Amazon, which saw its stock jump 10% in after-hours trading following a massive boom in its cloud computing division. Chief executive Andy Jassy reported a 37% growth in Amazon Web Services, marking the segment's strongest performance in four years and pushing overall company sales up 20% to $200 billion.

Profits for the e-commerce giant more than doubled to $63 billion, easily offsetting a negative free cash flow of $7.6 billion caused by relentless spending on artificial intelligence infrastructure. Amazon now expects to spend $220 billion on AI projects this year, prompting Forrester analyst Tracy Woo to question the long-term economic exposure of such heavy investments when new data capacity comes online in 2027 and 2028.