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Apple's $471B Rally Awaits AI Impact at WWDC

Apple's $471 billion rally hinges on AI announcements at WWDC, with stock up nearly 20% from April low.

6/10, 07:05 EDT
Apple Inc.
Amazon.com, Inc.
Alphabet Inc.
Meta Platforms, Inc.
Microsoft Corporation
NVIDIA Corporation
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Key Takeaway

  • Apple's $471 billion rally hinges on AI announcements at WWDC, crucial for driving consumer interest and stock momentum.
  • Despite a 20% surge since April, Apple’s year-to-date rise of 2.3% lags behind peers like Microsoft and Nvidia.
  • Investors anticipate AI integration with OpenAI in iPhone features; failure to impress could stagnate the stock.

AI Focus at WWDC

Apple Inc. is set to spotlight its artificial intelligence (AI) initiatives at the annual Worldwide Developers Conference (WWDC) starting Monday. This event is anticipated to be a pivotal moment for the company, which has seen a $471 billion rally in its stock, largely driven by optimism around AI. Investors are keen to see if new AI features will drive consumer interest in the next generation of iPhones, countering the perception that Apple has few growth catalysts.

Wedbush analysts have labeled the conference as “the most important event for Apple in over a decade.” Greg Martin, co-founder of Rainmaker Securities, emphasized the stakes: “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.” Conversely, a positive event could act as a significant catalyst for the stock.

Apple's stock has surged nearly 20% from its April low, returning to a market valuation above $3 trillion and nearing a record close. This rally is partly due to a positive earnings report in early May, where Apple announced the largest buyback in U.S. history. However, the improving sentiment around AI has also been a central factor.

Market Performance and Comparisons

Despite recent gains, Apple’s year-to-date rise of 2.3% lags behind the Nasdaq 100 Index’s 13% advance. Other tech giants with more direct AI exposure, such as Microsoft Corp., Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc., have posted double-digit gains. AI-focused chipmaker Nvidia Corp. has soared 144%, briefly overtaking Apple in market size.

Apple's underperformance reflects its slower growth compared to its megacap peers. Revenue fell 4.3% in Apple’s fiscal second quarter, marking the fifth contraction in the past six quarters. Despite this, Apple trades at 28 times estimated earnings, a significant premium to its 10-year average of 19. This high multiple and lack of growth have led to fewer than two-thirds of analysts tracked by Bloomberg recommending the stock, a low ratio among megacaps.

AI Integration and Expectations

The WWDC comes at a crucial time, with investors hoping new AI features will catalyze an iPhone upgrade cycle and boost Apple’s high-margin services business. Bloomberg News has reported that Apple will announce a partnership with OpenAI to integrate its AI model into the iPhone’s operating system. This could mean AI-supported features for native apps like Siri, photos, music, and iMessage.

However, analysts like Bernstein’s Stacy Rasgon caution that while AI functionality on the iPhone “is likely to be useful and pervasive, it may not be revolutionary compared to what Google and Samsung have offered.” The consensus for Apple’s full-year net earnings has barely changed over the past quarter, and revenue estimates for 2025 have also declined.

Rick Bensignor, CEO of Bensignor Investment Strategies, noted, “The event looks at least somewhat built into the stock, and Apple therefore needs to really come up with something new for the momentum to continue.”

Street Views

  • Greg Martin, Rainmaker Securities (Cautiously Optimistic on Apple):

    "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."

  • Stacy Rasgon, Bernstein (Neutral on Apple's AI functionality):

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

  • Rick Bensignor, Bensignor Investment Strategies (Cautiously Optimistic on Apple's momentum):

    "The event looks at least somewhat built into the stock, and Apple therefore needs to really come up with something new for the momentum to continue."