Apple blazed the trail for hot tech trends with products like the Mac, the iPhone and the App Store. But in the frenzy over artificial intelligence, the tech giant is considered AWOL. The Silicon Valley behemoth's Big Tech peers led by Microsoft, Google and Meta have grabbed the AI spotlight — and that has weighed on Apple stock, which has treaded water this year while the others climbed.
All that could change this month. Apple is taking the wraps off its much-awaited AI offensive at the Cupertino, Calif.-based company's Worldwide Developers Conference. The annual Apple WWDC event, which starts June 10, could be a make-or-break event for Apple stock.
Wedbush Securities analyst Daniel Ives calls the conference "the most anticipated Apple event in a decade."
"Every other tech stalwart has unveiled its AI strategy and vision with one exception — Cupertino," he told Investor's Business Daily.
Apple Stock: AI Overhang
The view that Apple lacks a clear AI game plan has cut $25 to $30 off the price of Apple stock, Ives estimates. With Apple stock now trading near 192, that suggests a 13% to 16% damper on the price.
Gene Munster, managing partner at Deepwater Asset Management, agrees. "If they had a clear strategy that people believed in, I think the stock would be 15% higher," he told IBD. "It's a big overhang, especially given what their growth has looked like over the past two years, which has been nonexistent."
Apple has been characteristically mum on what it plans to announce at WWDC, which opens with a keynote presentation from Chief Executive Tim Cook.
Speaking to Wall Street analysts on a conference call May 2, Cook stressed Apple's belief "in the transformative power and promise of AI."
"We believe we have advantages that will differentiate us in this new era," Cook said. He pointed to "Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple silicon with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create."
WWDC Needs A 'Gettysburg Address'
Apple must clear a high bar. Cook will unveil the Apple AI strategy after well-received AI-focused events from Alphabet unit Google, Microsoft and ChatGPT creator OpenAI.
"It's a Gettysburg Address-type deal for Cook," Ives said. "This can't be a fluff event. Developers need to come away knowing that this is a new era for Apple."
He added, "The AI revolution is the biggest technology change we've seen in 40 years. And Apple can't be on the outside looking in."
So, what is Apple likely to reveal at WWDC? And will it be enough to give Apple stock a bounce?
WWDC Speculation On Apple AI Partnership
News leaks point to Apple partnering with OpenAI or Google for their foundational large language models for generative AI and data center capacity.
OpenAI likely has the edge for a deal, analysts say. Apple already has a partnership with Google for search, but that arrangement is under antitrust scrutiny by the U.S. Department of Justice. Plus, Google touted its recent smartphone AI advancements as being "Only on Android."
At WWDC, Apple will concentrate on on-device AI enhancements for the iPhone, iPad and other products. Current generative AI offerings from rivals process prompts in remote data centers, which slows the response time.
Apple's main focus will be on iOS 18, the next operating system for the iPhone. It's due out this fall with the iPhone 16 series handsets.
"The main on-ramp to AI is going to be the iPhone," Ives said. "That's how most consumers are going to interact with AI."
Apple AI Priorities: A Better Siri
High on the list of Apple's priorities is improving Siri. Apple's voice-response digital assistant has limited functionality today, but it could be upgraded to become a full conversational AI assistant, analysts say.
"Some people have written Siri off," Munster said. "But if they get Siri right, the frequency that you engage with your device is going to increase, and that benefits Apple."
Apple also will look to add multimodal AI that takes advantage of the smartphone camera to see and interpret the real world. Multimodal inputs include text, images and sound.
Google showed off such capability for Android smartphones with its AI chatbot called Gemini. And OpenAI demonstrated an AI voice assistant that sounded suspiciously like actress Scarlett Johansson.
Generative AI applications shown at the Google and OpenAI events included real-time language translation. They also included the ability to provide relevant information about text and objects as seen through the camera.
Apple Stock: WWDC Event Needs 'Big A-Ha's'
Apple faces another serious hurdle. Google, Microsoft and OpenAI have rolled out big AI news recently. Apple's WWDC presentations could come across as me-too offerings.
"The hope is for some big a-ha's," Creative Strategies analyst Ben Bajarin told IBD.
But Apple needs to add similar AI features to its devices or the company risks falling behind, Bajarin says.
With generative AI, Apple will focus on helping consumers, not just showing off cool technology for its own sake, he says. One of Apple's strengths is its installed base of 2.2 billion devices in use worldwide.
Also, since WWDC is targeted to software developers, Apple is likely to announce advancements with its software development kits, or SDKs, for making apps for its devices, Bajarin says.
In addition, Apple is seen unveiling a new software tool for developers that uses generative AI to write code. The tool is said to operate similarly to Microsoft's GitHub Copilot.
Plus, Apple likely will discuss some work on its own large language models for AI, analysts say.
Privacy And On-Device AI
Deepwater's Munster says Apple can differentiate itself in another area: privacy and data security.
"Privacy is an advantage for Apple," he said. "They have built a brand around it."
If Apple can convince users to opt in for on-device AI, it can offer AI agents that work on behalf of users and get things done for them, he says. That could include scheduling appointments, providing reminders, helping to plan trips and even paying bills.
Generative AI features on the iPhone could spur a two-year supercycle of upgrades, Wedbush's Ives says. And if those new handsets require more memory and other components, that could bump up average iPhone selling prices. Ives rates Apple stock as outperform with a 12-month price target of 275. At that price, Apple stock would be up 44% from its closing price Thursday.
Apple Stock Investors Should Like This
Meanwhile, Apple is not chasing Big Tech peers Amazon.com, Google, Meta Platforms and Microsoft in spending heavily on data center investments. Those four companies plan over $200 billion in capital spending this year, with a major portion going to AI data centers, Bernstein analysts said in a recent AI stocks report.
"If current estimates hold up, we could see Big Tech's combined capex spending over the next 4-5 years comfortably surpass $1 trillion-plus," Bernstein analysts led by Mark Shmulik wrote to clients.
The fact that Apple isn't pouring big bucks into AI data center investments is good news for Apple stock investors, Jordan Klein, a trading desk analyst with Mizuho Securities, said in a recent client note.
"What I like for Apple investors is that they are not going to take the capex bazooka and blow the bank on spending to catch Microsoft, Amazon, Meta and Google," Klein said. "Rather they will spend smartly and utilize the major investments already being made that can help them accelerate their AI offering in a cost-effective manner and devote capex and cash flows to new product development on (the) hardware and software side."
Apple is "playing another game," Ives said. It is targeting on-device or edge applications for AI that are focused on consumers, not enterprises, he says.
Home Robots Next Project For Apple?
Meanwhile, Apple is reportedly funding at least two robotics projects, according to Evercore ISI analyst Amit Daryanani. He rates Apple stock as outperform with a price target of 220.
In a recent client note, Daryanani said those robotics projects include a mobile home robot, potentially with a humanoid shape, and a robotic arm that sits on a counter or table. However, both projects "will likely take years to reach market readiness."
Current Apple Stock Analysis
Last year, Apple stock climbed 48.2% to 192.53. But AAPL stock ended the regular session on May 30 at 191.29.
IBD MarketSurge charts show Apple stock in a 24-week consolidation pattern with a buy point of 199.62. That buy point is also its all-time high, which it reached on Dec. 14, 2023.
Apple has a mediocre IBD Composite Rating of 74 out of 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
