Shares of Apple (AAPL -3.19%) fell 4.1% on Tuesday, as of 12:30 p.m ET.

Apple was downgraded by not one but two Wall Street sell-side analysts, as preliminary figures for the December quarter suggest disappointing iPhone sales.

Jefferies and Loop take Apple down a notch

Today, analysts at Jefferies and Loop Capital each downgraded their ratings on Apple.

Jefferies analyst Edison Lee downgraded Apple from hold to underperform and lowered his price target from $211.84 to $200.75. Referencing International Data Corporation (IDC) data, Lee recalibrated iPhone shipment figures from 1% growth to a 2% decline in the December quarter. But even that may be optimistic, as IDC data indicates the potential for a 4% decline in iPhone shipments.

The main source of weakness is China, unsurprisingly, where independent research suggests an 18.2% decline in iPhone sales. The Chinese consumer is in a sort of recession at the moment, and low-priced domestic rivals appear to be taking share.

Lee also noted consumers don't appear to see a huge benefit from Apple Intelligence as of yet. As such, the anticipated AI-fueled upgrade cycle may not materialize as some think.

Loop also downgraded Apple from buy to hold today, citing weak current trends and the potential for bad forward guidance for the March quarter. Loop remains a bit more optimistic than Jefferies, as it still anticipates a "material amplifying" of demand in the June and September quarters later this year. Loop still believes in Apple's "structural" long-term growth as an AI beneficiary, but the timing appears delayed.

Can Apple figure out AI?

At over 36 times earnings, Apple appears expensive for a company that only grows in the single digits. Apple also has complications with China from a demand perspective and the fact that it manufactures iPhones there. Furthermore, it's an open question as to whether Apple can execute on AI.

Apple still has a huge, sticky customer base, so it doesn't appear there is any grave danger. But its valuation doesn't leave much room for disappointment at these levels.