Apple (NASDAQ:AAPL) shares dipped more than 1% intra-day today following a downgrade from Jefferies, which shifted its rating on the tech giant to Hold from Buy, with a revised price target of $212.92. Jefferies raised concerns that the market may have set overly optimistic expectations for Apple's upcoming iPhone 16 and iPhone 17 models. Analysts underscored Apple's reliance on iPhone sales, which comprised 52% of total revenue in fiscal year 2023, as a key factor in the downgrade. The report suggests that the market’s projected 5%-10% unit growth for new iPhone models may be unrealistic, given the modest upgrades and limited AI integration in the upcoming releases. Demand for the iPhone 16 is expected to underwhelm, with forecasts indicating flat volume growth for the latter half of 2024 compared to the iPhone 15 and only a 2.5% increase in lifecycle volume for the iPhone 16. Jefferies also pointed to the limited immediate impact of AI in smartphones, estimating that true AI functionality is “likely 2-3 years away.” Current smartphones lack the high-speed memory and sophisticated packaging technology required for substantial AI capabilities. As a result, the analysts argued that any acceleration in the smartphone replacement cycle due to AI remains unlikely in the near term. Despite near-term concerns, Apple is projected to introduce a sleeker model, the “iPhone 17 Air,” in 2025, which Jefferies believes could encourage upgrades. The firm also remains optimistic about Apple’s longer-term AI potential.