Apple is on top of the world. That may be John Ternus's biggest challenge, but also his largest opportunity.

When Ternus steps in as Apple's chief executive on Tuesday, he takes over the world's second-largest company by market capitalization, valued at nearly $5 trillion. Starting from such lofty heights, it could be difficult to continue the company's remarkable climb.

There is one way, which company observers have said has been lacking since the Steve Jobs era: revving up Apple's innovation engine, especially in artificial intelligence.

Tim Cook's brilliance was to take the company Jobs built and scale it, massively. The year Cook took over, Apple sold 72 million iPhones. This year it will be 255 million, Counterpoint Research estimates.

Tripling volumes, hitting annual release dates like clockwork, minimizing risky capital investments and returning more than $1 trillion to shareholders through dividends and buybacks helped Cook multiply Apple's valuation 13 times during his tenure.

And it isn't as if Apple stopped innovating entirely. The company sells more watches annually than Switzerland. AirPods are as big as Major League Baseball by sales. Add to that the huge and highly profitable services business that Cook has expanded which includes app sales and tens of billions of dollars in fees paid by Google.

But, in Wall Street parlance, the positives look priced in. Apple stock trades at 33 times next year's earnings, compared with the S&P 500's collective multiple of 20 times. Apple gets that premium even though its earnings are growing half as fast as the market.

Investors are paying up for Apple because it looks relatively safe at a time of broad anxiety over returns to be had on massive investments in AI, argues analyst Craig Moffett of Moffett Nathanson. "But when valuation gets stretched, safety isn't safe anymore," Moffett said.

And there are negatives that investors may be overlooking. In the age of AI, Apple has lost its status as the company that defines how consumers interact with devices, a title it held for 40 years, from the Apple II to the iPhone. That leaves it vulnerable to a new generation of devices built specifically for AI, which OpenAI and SpaceX are working on, for instance.

The AI boom has dealt Apple another blow. Suddenly it is no longer the dominant buyer of key components that it needs to make its devices. AI hyperscalers throwing gigantic sums at chip makers are eating up the capacity Apple needs, chiefly for memory and storage chips, as well as logic chips. That isn't only driving up Apple's costs, which it is passing on to consumers, it is also leading to shortages as the company can't meet consumer demand.

The other major supply chain issue hanging over Ternus's head is Apple's continued dependence on China. Cook has mostly warded off President Trump's tariffs with his deft politicking, and Apple's longtime CEO will continue to handle key political relationships in his role as executive chairman, but the fundamental problem remains: The vast majority of Apple's supply chain resides in a country locked in a long-term trade war with the U.S.

Meanwhile, a determined California judge appears to have slowed Apple's services juggernaut with rulings that reduce the fat fees Apple has long collected for in-app purchases. App developers who kick back as much as 30% of their mobile revenue to Apple can now dodge such payments by charging via their own websites. Appfigures estimates that Apple's App Store commission revenue in the U.S. fell 6% in the June quarter.

But when Ternus bounds on stage for the first time as Apple's CEO on Sept. 9, he can feel confident that Apple devices are more popular than ever. Whatever the iPhone 17 Pro lacked in AI features was outweighed by its better camera, stronger battery, and, silly though it sounds, its cool orange color. Buyers snapped them up at record volumes.

The Mac, too, is having a renaissance in the age of AI as it turns out the Apple-designed chips inside them are great for running large language models from a desktop. Apple can't make Macs fast enough, leading to the shortages.

And for the first time in a while, Apple will have one more thing up its sleeve to close out Ternus's first iPhone launch event: a foldable iPhone. It isn't the first folding phone, but analysts expect it will gobble up the category, capturing 40% of all foldables by the end of 2027, research firm IDC estimates.

Apple is positioned to expand its massive base of some of the world's most lucrative users, many of whom are primed to finally experience a more powerful AI assistant. The company announced a software update to the long-dimwitted Siri that it said would enable the completion of more tasks. Early Wall Street Journal tests of the Siri AI beta show that it can take longer than rivals to complete requests, but with the help of Google on the back end, Apple has improved Siri drastically, turning the assistant into a modern chatbot.

If Ternus can speed up Siri, if he can convince app developers that they need to open up their services to the AI assistant so iPhone users can access them with simple prompts rather than clicking in and out of apps, it could it could set the stage for Apple, an AI laggard in many respects, to become the company that delivers the promises of the revolutionary technology to the most consumers.