Apple's AI leap

Company News

by Glenn Dyer


Apple has made fools of all those investors, analysts, and others who had been chiding it (and stronger) for falling behind in AI - its big launch Monday was "underwhelming," according to most critics.

By Tuesday, they were eating their words as the shares soared to a record high and restored the company to Wall Street’s pecking order - the $US3 trillion club.

Apple shares closed up 7% to a new record high of $207.15 each on Tuesday, with a value of $US3.18 trillion. Microsoft held onto the top spot with a small rise to $US3.22 trillion.

Apple introduced a range of new AI features during its World Wide Developers Conference event, including an overhaul of its voice assistant Siri, integration with OpenAI’s ChatGPT, a range of writing assistance tools, and new customizable emojis.

The company pitched the features as AI for the average person, though users will likely need to upgrade or buy a new iPhone later this year.

Smart analysts pointed out that the term "AI" (Artificial Intelligence) has been co-opted by Apple for its Apple Intelligence programs - with an estimated 50% plus of Americans owning an iPhone, it is a telling move. Add in wearables like the iWatch, and the potential for a surge in device sales in coming years is enormous.

US analysts fell over themselves in changing their view, according to reports on CNBC.

For example, analysts from Morgan Stanley said Apple’s AI features strongly position the company with "the most differentiated consumer digital agent."

And the analysts said the new features should drive consumers to upgrade their iPhones, which should "accelerate device replacement cycles."

They said Apple will still have to deliver when the AI features are first available in the fall, but they think the "building blocks are in place for a return to growth and more sustained outperformance."

"Following a WWDC that delivered on the key details we were focused on heading into the event, we have even greater conviction that Apple is on the cusp of a multi-year product refresh that underpins our overweight rating."

Bank of America analysts were also optimistic about Apple’s announcements, saying the features will lead to "an upgrade cycle for AI-enabled IntelliPhones." The analysts maintained their buy rating on the stock due to the promise of a multiyear upgrade cycle, potential for gross margin upside, and services growth.

Evercore analysts said they came away from the conference with "increased confidence" in Apple’s AI strategy, particularly because they believe it will push users to upgrade their devices.

"Restricting Apple Intelligence to iPhones sold within the last year adds to our conviction that AI can help kick off an iPhone super cycle," the analysts said in a note, CNBC reported on Tuesday.

Shares in the previous market darling, Nvidia, fell 0.7% to a market value of $US2.97 billion. Last week, the company’s value got to within $US100 million of Apple’s.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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