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Apple AI Event to Boost iPhone, May Swing Stock

Apple's WWDC to showcase AI features, analysts predict 14% stock upside with $225 price target.

6/10, 11:19 EDT
Apple Inc.
Amazon.com, Inc.
Alphabet Inc.
Meta Platforms, Inc.
Microsoft Corporation
NVIDIA Corporation
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Key Takeaway

  • Apple is expected to unveil AI features at WWDC, potentially boosting iPhone demand and stock performance.
  • Analysts highlight Apple's unique advantage in AI due to its control over silicon design and a large user base.
  • High expectations could lead to stock volatility; failure to impress may result in stagnation despite recent gains.

Apple’s AI Potential

Apple Inc. is under increasing pressure to showcase its artificial intelligence (AI) capabilities at its annual Worldwide Developers Conference (WWDC) on Monday. Investors are eagerly anticipating the announcement of new AI-enabled features, which could potentially unlock pent-up demand, accelerate iPhone replacement cycles, and sustain recent stock outperformance. "While investor expectations are high, we think Apple could positively surprise," wrote Morgan Stanley’s Erik Woodring in a recent note to clients.

Shares of Apple have risen just 1.5% since the start of the year, lagging behind major technology peers like Nvidia and Microsoft, which have been rewarded for their clear AI strategies. Analysts expect Apple to unveil an upgraded version of its Siri digital assistant integrated into apps such as Notes, Messages, and Safari, along with an updated iOS 18 operating system. Additional AI-powered features could include new emojis and photo editing capabilities.

JPMorgan’s Samik Chatterjee noted, "We view the presentation at WWDC to ‘tick all the boxes’ to convince investors that Apple is able to differentiate iPhone 16 (and future generations) with AI features relative to iPhone 15 and prior generations." Chatterjee retained a $225 price target on Apple shares, implying a 14% upside from Friday’s close. Citigroup analyst Atif Malik highlighted Apple’s "unique advantage" due to its control over its own silicon design and services ecosystem, which includes a large user base of over 2 billion installed devices.

Market Reactions and Expectations

The WWDC event is not typically regarded as a major market-moving catalyst, but the anticipated announcement of new generative AI features changes the narrative this year. Woodring noted that shares tend to underperform the S&P 500 by 10 basis points on average on the day of the event. However, the high expectations could invite disappointment if the event does not deliver compelling reasons for consumers to upgrade their devices.

Greg Martin, co-founder of Rainmaker Securities, stated, "If Apple doesn’t come out with compelling reasons to upgrade, that’s a real problem. If the event is uninspiring, I think the stock will be stagnant for a while." Despite the recent gains, Apple’s year-to-date rise of 2.3% is modest compared to the Nasdaq 100 Index’s 13% advance. Stocks with more concrete AI exposure, such as Microsoft, Amazon, Alphabet, and Meta Platforms, have all posted double-digit gains. AI-focused chipmaker Nvidia has soared 144%, briefly overtaking Apple in market size.

AI Integration and Partnerships

Bloomberg News reported that Apple will announce an agreement with OpenAI at the conference, integrating the company’s AI model into the iPhone’s operating system. This integration is expected to bring AI-supported features to native apps, including Siri, photos, music, and iMessage. However, analysts like Bernstein’s Stacy Rasgon believe that while AI functionality on the iPhone "is likely to be useful and pervasive, it may not be revolutionary relative to what Google and Samsung have offered in their AI phones."

Apple’s control over its own silicon design and services ecosystem gives it a unique advantage. The company’s large user base provides a massive amount of data to optimize user experience. "The more than 2 billion installed base means the company has a large user base with massive amounts of data to optimize user experience," wrote Citigroup analyst Atif Malik.

Street Views

  • Erik Woodring, Morgan Stanley (Bullish on Apple):

    "While investor expectations are high, we think Apple could positively surprise, helping to unlock pent-up demand, accelerate iPhone replacement cycles, and sustain recent stock outperformance."

  • Samik Chatterjee, JPMorgan (Bullish on Apple):

    "We view the presentation at WWDC to ‘tick all the boxes’ to convince investors that Apple is able to differentiate iPhone 16 (and future generations) with AI features relative to iPhone 15 and prior generations... while still debating the peak of the accelerated upgrade cycle."

  • Atif Malik, Citigroup (Neutral on Apple's AI potential):

    "The more than 2 billion installed base means the company has a large user base with massive amount of data to optimize user experience."

  • Toni Sacconaghi, Bernstein (Neutral on Apple's AI functionality):

    "We believe that AI functionality is likely to be useful and pervasive, but not necessarily revolutionary relative to what Google (and Samsung) have offered in their AI phones."