Apple investors shrugged after the consumer electronics giant on Monday finally revealed its strategy for artificial intelligence, which it branded Apple Intelligence. But on Tuesday, Apple stock broke out after investors reconsidered the AI news.
Apple detailed its plans to add AI to the iPhone, iPad and Mac computers during a keynote presentation to kick off its annual Worldwide Developers Conference.
Apple's approach to AI involves both on-device and data-center processing with a focus on privacy and security. The company will use its own AI models and third-party models, starting with OpenAI's ChatGPT.
Apple's AI services will be available starting this fall, but only for the current iPhone 15 Pro model handsets and Macs and iPads with the M1 processor or newer chips. AI also will be embedded in the upcoming iPhone 16 handsets and other new hardware.
However, Wall Street analysts were split in their opinions on whether the AI advancements will be enough to spur consumers to upgrade to new iPhones.
Apple Stock Hits Buy Point
On Monday, Apple stock sank 1.9% to close at 193.12. But on the stock market today, Apple stock broke out of a cup base at a buy point of 199.62, according to IBD MarketSurge charts.
Apple stock rose 7.3% to close at 207.15 on Tuesday.
Apple's news on Monday is just the first step in the company's generative AI strategy, TD Cowen analyst Krish Sankar said in a client note Tuesday. After adding AI to its software platforms this year, Apple will turn its attention to semiconductor upgrades in 2025, he said.
Sankar reiterated his buy rating on Apple stock with a price target of 220.
AI Is 'Game Changer' For Apple
Apple's foray into artificial intelligence is a "game changer" for the company, Wedbush Securities analyst Daniel Ives said in a client note. AI will drive the next growth cycle for Apple over the coming years, Ives said. He rates Apple stock as outperform with a price target of 275.
Ives predicted an "AI-driven iPhone upgrade cycle starting with iPhone 16" later this year.
JPMorgan analyst Samik Chatterjee concurred. He predicted the iPhone upgrade cycle will start with the iPhone 16 this fall and peak with the iPhone 17 in late 2025. He rates Apple stock as overweight with a price target of 225.
The collection of new features announced, despite the absence of any "killer apps," will provide reasons for many of the estimated 1.4 billion iPhone users to upgrade, Chatterjee said in a client note Monday.
But other analysts were skeptical that Apple Intelligence will revive iPhone sales.
AI Reveal Called 'Disappointing,' 'Tone Deaf'
Apple's AI enhancements aren't compelling enough for the average consumer to purchase a new device, KeyBanc Capital Markets analyst Brandon Nispel said in a client note.
Needham analyst Laura Martin called Apple's long-awaited AI strategy reveal "disappointing."
"There was nothing we heard during the WWDC keynote that makes us believe that consumers will buy iPhones faster than our current projections," Martin said in a client note Tuesday. "GenAI (generative artificial intelligence) was the best hope, but fizzled."
She also said Apple appeared "tone deaf to Wall Street's concerns" by waiting until the second half of its presentation to discuss AI.
"Since public investors have liquidity, shares fell steadily as the 100-minute presentation wore on," Martin said. She rates Apple stock as buy with a price target of 220.
No Surprises At WWDC Presentation
Apple's WWDC keynote was a "sell-the-news event" on Monday, several analysts said.
"Most of the announcements were well telegraphed, which left little room for surprises," Daniel O'Regan, managing director of equity trading at Mizuho Securities, said in a client note Tuesday.
While the news was in line with expectations, it was "modestly disappointing," given the rally in Apple stock ahead of the event, O'Regan said.
Siri Is Key To Apple AI
The centerpiece of Apple's AI strategy is a revamped Siri digital assistant, which responds to voice and text prompts. With AI smarts, Siri will be able to work across apps and retrieve information from messages, emails, calendar, photos and other apps. It can also summarize emails and webpages and transcribe calls. Plus, it can generate custom emoji and other images.
Apple's new AI features will be available only to "U.S. English" users this fall, with support for other languages coming later.
The North American market makes up over 30% of the iPhone user base, Morgan Stanley analyst Erik Woodring said in a client note Tuesday. And about 25% of the global population speaks English as a first or second language, he said.
"Apple was clear that over time they want to expand this functionality to new languages, which we see as key to broader adoption/device refreshes," Woodring said. He rates Apple stock as overweight with a price target of 216.
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