Apple bears are proven wrong yet again as iPhone defies the China slump narrative

CNBC Finance

5 min read

Memory shortages. Way behind on AI. Tariff troubles. None of that seems to matter to Apple. It keeps selling tons of iPhones â bucking expectations, especially in China. iPhone sales in China surged 23% during the first nine weeks of 2026, in contrast to a 4% year-over-year decline in the entire smartphone market there, according to research firm Counterpoint . "Exactly the opposite of what everyone was saying," Jim Cramer said Thursday â well, so much for the idea that Apple is losing share and failing to compete in its second-largest market. The tech giant once again proved skeptics wrong â just like it did during the holiday quarter, when Greater China revenue overall jumped 38% to $25.53 billion, exceeding estimates by roughly $4.7 billion. The iPhone had its best quarter ever in China, due to enthusiasm for the iPhone 17 lineup, record upgraders, and double-digit percentage growth from switchers. Memory According to Thursday's report from Counterpoint, Apple attracted more customers in China this year because it held the line on pricing. Chinese competitors have been forced to hike prices to mitigate their increased costs for the memory that goes into the devices. The explosion of artificial intelligence has caused a massive worldwide memory shortage. Smartphones contain memory chips that allow them to multitask and function, and storage memory for the operating system, apps, photos, and files. "Maybe this is a sign that [Apple's] better [at] managing memory costs versus competitors that have to raise prices," Jeff Marks, the Investing Club's director of portfolio analysis, said during Thursday's Morning Meeting. That was certainly the case in Apple's December quarter. We'll see what happens when Apple reports its current March quarter results in about six weeks. We see three reasons why Apple has an advantage over its rivals going forward. Strong companywide margins can help Apple absorb costs. Even a decision to take a short-term hit to hardware profits (which has not happened yet) would be a strategic trade-off to bring new iPhone users into Apple's ecosystem to drive long-term revenues for its increasingly important high-margin services business. Apple has secured long-term memory contracts with suppliers way in advance, allowing Apple to lock in lower prices before they soared. On the most recent earnings call, CEO Tim Cook provided a brief nod to that notion. "AsÂ always,Â we'llÂ lookÂ atÂ aÂ rangeÂ ofÂ optionsÂ toÂ dealÂ withÂ that," he said. Finally, Apple gets the best prices and first dibs on memory from suppliers like TSMC because they're just too big to ignore. It's a massive risk for TSMC to gamble billions in sales on a smaller tech company with unpredictable orders when they can count on Apple's hardware cycles. Artificial intelligence Memory isn't the only way Apple's overcome headwinds and silenced skeptics. Look at its artificial intelligence journey. Apple's AI rollout was staggered and underwhelming for much of 2024 and 2025 after high expectations. The company has been playing catch-up ever since. Trying to do AI in-house has been one problem after another â from feature delays to key personnel departures. That narrative changed in 2026. In January, Google and Apple announced a multiyear partnership in which Google's Gemini AI and cloud will power Apple's artificial intelligence features, including a super-smart Siri. While Apple is expected to pay Google an annual fee of around $1 billion, that's nothing compared to the hundreds of billions of dollars being spent by companies in the AI arms race. "This is a great opportunity to realize that they happen to get the premier AI by dealing with Gemini," Jim Cramer previously said . This is a massive win-win for both Club names. Additionally, Alphabet 's Google is still paying a fortune for search priority on Apple devices. A federal court ruling last year allowed that to continue. Last month, the government filed an appeal of the ruling. Tariffs Apple was also able to ultimately work around President Donald Trump 's tariffs. The impact of higher levies previously bogged down the stock,Â especially after Trump last May threatened to hit Apple with a 25% tariff on iPhones manufactured abroad. Months later, Cook got back on the administration's good side. Apple announced a $100 billion commitment to U.S. manufacturing in August, on top of its already-pledged $500 billion investment over the following four years. Cook's ability to navigate these muddy political waters to curb tariff risks was certainly impressive. Bottom line Yet again, we're reiterating our "own, don't trade" stance on Apple. After all, as Jim has said in the past , the company makes "the greatest product in the world" with the iPhone as its biggest money maker. The Club has a hold-equivalent 2 rating on shares. Our price target on Apple is $300 per share, implying roughly 20% upside from Thursday's close. (Jim Cramer's Charitable Trust is long AAPL, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Apple bears are proven wrong yet again as iPhone defies the China slump narrative

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