Apple’s stock surged to a record high on Tuesday, reaching an intraday record high of $203 per share, following the company’s announcement of its long-awaited AI platform, Apple Intelligence. The stock had experienced a decline on Monday during and following the company’s WWDC conference. However, analysts’ positive reactions to the announcements led to a significant upward trajectory.
Apple Intelligence: A New Era in AI
Apple Intelligence is the company’s entry into the generative AI space, designed to be integrated across Apple’s hardware and software products, including the iPhone, Mac, mail, messages, and photos. The platform will be accessible for the iPhone 15 Pro, iPads, and Macs powered by Apple’s M1 series chips and newer, starting this fall. Key features of the launch include enhancements to Siri, enabling it to extract addresses from messages or locate photos based on voice commands. Apple also introduced new software updates for its iPhone, watch, and computer products.
Analysts’ Optimism Boosts Stock
D.A. Davidson managing director Gil Luria expressed enthusiasm about Apple’s announcements, upgrading Apple from Neutral to Buy and raising his price target from $200 to $230. Luria believes that the AI integrations could initiate a new upgrade cycle for the iPhone, as the new features will only be available for iPhone 15 Pro or newer models. He emphasized that consumers purchasing new phones during the holiday season will be introduced to these fantastic functionalities, which will drive the product upgrade cycle over the next few months and quarters.
D.A. Davidson managing director Gil Luria told Yahoo Finance
“If you look at the signal away from the noise, you realize that this is unprecedented capability that Apple is going to introduce and it’s going to integrate AI into everyday life,”
Luria adds
“As people buy new phones this holiday season, they’re going to see this great functionality…They’re going to show their friends and family and the product upgrade cycle will happen over the next few months and quarters…The stock’s been flat because there hasn’t been revenue growth at Apple…Now, we think that this will allow Apple’s overall growth to accelerate from the low single digits into the mid-, maybe even high-single digits over the next year or two. That’s what can drive Apple’s stock.”
Market Capitalization and Stock Performance
Apple’s market capitalization now stands at over $3.1 trillion, making it the second most valuable company globally, behind Microsoft. The stock has gained over 15% in the past two months, reversing a sluggish start to the year due to concerns over slowing iPhone demand. Luria believes that the AI integrations could significantly contribute to the stock’s growth moving forward, enabling Apple’s overall growth to accelerate from the low single digits to the mid- to even high-single digits over the next year or two, which could drive Apple’s stock price.
Gizchina News of the week
Apple Intelligence: Partnership with OpenAI
Apple formally announced its partnership with OpenAI, which will power its AI platform. Users will have access to ChatGPT for free, but paying users will have access to more features in the future. OpenAI is backed by Microsoft, further solidifying Apple’s position in the AI market.
According to Bloomberg, to catch up, Apple has partnered with OpenAI to integrate ChatGPT into the iPhone’s operating system. This deal was a major focus of Apple’s Worldwide Developers Conference. This shows how much the power dynamics in Silicon Valley have changed in the past few years.
The deal gives OpenAI access to hundreds of millions of Apple users, including those who might be hesitant to use ChatGPT. For Apple, the partnership brings the company one of the hottest technologies of the AI era — a chatbot with superpowers that it can integrate with its services.
Analysts Forecasts and Outlook
Analysts at Morgan Stanley believe that Apple’s AI features strongly position the company as “the most differentiated consumer digital agent.” They also believe that the features will drive consumers to upgrade their iPhones, which should “accelerate device replacement cycles.” The analysts maintained their buy rating on the stock due to the promise of a multi-year upgrade cycle, potential for gross margin upside, and a $270 bull case valuation.
Bank of America analysts were also optimistic about Apple’s announcements, stating that the features will lead to “an upgrade cycle for AI-enabled IntelliPhones.” They maintained their buy rating on the stock due to the promise of a multi-year upgrade cycle and the potential for gross margin upside.
JPMorgan senior analyst Samik Chatterjee wrote in a note to clients on Monday.
“Our experience with consumer surveys with prior generations of iPhone launches tell us that the hardware upgrade cycle is more driven by a collection of feature upgrades across diverse applications, which in aggregate will provide…reasons to upgrade over the next few years…The release of the AI features across Mac, iPads and iPhones will support an upgrade cycle across all the devices.”
Conclusion
Apple’s stock surge to a record high after AI announcements marks a significant milestone for the company. The integration of AI across Apple’s products and services is expected to drive growth and accelerate the company’s overall performance. Analysts’ optimism about the potential of Apple Intelligence and the company’s partnership with OpenAI have boosted investor confidence, leading to a significant upward trajectory in the stock. As the company continues to innovate and expand its AI capabilities, investors can expect Apple’s stock to remain a strong performer in the market. What do you think about Apple Intelligence? Will it take the company to new heights? Let us know your thoughts in the comment section below
