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Apple AI Boosts Shares, Predicts Strong iPhone Upgrades

Apple's AI Vision Unveiled at WWDC, Shares Surge 6.4% with Analysts Predicting 19% Upside and 238M Units by 2026

6/11, 13:31 EDT
Apple Inc.
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Key Takeaway

  • Apple’s AI initiative, "Apple Intelligence," integrates ChatGPT and enhances Siri, driving shares up 6.4% to a record high.
  • Analysts predict the AI features will fuel an iPhone upgrade cycle, with D.A. Davidson raising the price target to $230.
  • Despite some skepticism, Apple's stock has surged over 20% since April, adding more than $500 billion in market cap.

Apple Unveils AI Vision

Apple Inc. showcased its long-anticipated artificial intelligence (AI) vision during its Worldwide Developers Conference (WWDC) on Monday, introducing "Apple Intelligence." This new AI initiative includes integrating OpenAI’s ChatGPT and enhancing the capabilities of Apple’s Siri digital assistant. The announcement was well-received by the market, with Apple shares briefly rising as much as 6.4% on Tuesday to a record high. Analysts have praised the move, with D.A. Davidson’s Gil Luria upgrading Apple shares to a buy and raising the price target to $230 from $200, implying a 19% upside from Monday’s close.

Luria compared the AI announcement to Apple’s previous milestone moments, such as the transition of digital music to iTunes, stating, “Apple’s access to consumer data and trust can drive deeply integrated functionality in a way other tools can’t.” Goldman Sachs analyst Michael Ng noted the financial implications, suggesting that the new features could fuel an iPhone upgrade cycle and create opportunities for AI monetization. Morgan Stanley’s Erik Woodring also highlighted the potential for a rapid device replacement cycle, forecasting 227 million units in fiscal 2025, rising to 238 million units in fiscal 2026.

Positive Analyst Reactions

The AI announcement has garnered positive reviews from several analysts. Bernstein’s Toni Sacconaghi expects the new features to drive a stronger device upgrade cycle and potentially push Apple to $8 in earnings per share. Citigroup analyst Atif Malik called the conference the “best WWDC ever,” emphasizing Apple’s advantage in hardware and software integration while maintaining user privacy. Evercore ISI’s Amit Daryanani believes Apple’s lead in silicon will help it handle inferencing and offer unique generative AI options.

D.A. Davidson’s Gil Luria anticipates that the AI features will drive broader adoption, stating, “Apple is uniquely positioned to offer these capabilities, and may be the only one capable of doing so any time soon.” He added that Apple’s integration of summarization, enhanced search, and text generation into Siri could make it a more meaningful agent for users. Luria raised his fiscal year 2025 estimates above consensus, expecting an AI-driven boost for the iPhone maker.

Lingering Skepticism

Despite the positive reception, some analysts remain skeptical about Apple’s AI prospects. UBS analyst David Vogt described the announcement as “a bit disappointing relative to expectations,” maintaining that Apple’s AI strategy will not lead to a significant iPhone upgrade cycle this fall. Barclays analyst Tim Long viewed the AI announcements as “more of an evolution” and only matching expectations. He noted that while Apple’s software and developer support are strong, the event was not a catalyst from a stock standpoint due to the lack of new hardware announcements and the limited impact of the software features.

Apple’s shares have lagged behind major technology peers this year, partly due to the absence of a clear-cut AI plan. However, the recent AI announcement has fueled hopes that customers will pay for the next generation of iPhones, potentially leading to a much-needed upgrade cycle. The stock has risen more than 20% off an April low, adding over $500 billion to its market capitalization and returning it above a $3 trillion market cap.

Street Views

  • Gil Luria, D.A. Davidson (Bullish on Apple):

    "We believe yesterday’s presentation rhymes with one of Apple’s previous milestone moments — the transition of digital music from a standalone app with questionable regulatory standing (i.e. Napster) to an experience integrated into existing consumer applications (i.e. iTunes)."

  • Michael Ng, Goldman Sachs (Bullish on Apple):

    "[I am] encouraged by the financial implications [of the announcements]. New product features should help fuel an iPhone upgrade cycle."

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

    "The upgrades give Apple a strong position with the most differentiated consumer digital agent, while limited backwards compatibility of AI should accelerate device replacement cycles in-line with our overweight thesis."

  • Toni Sacconaghi, Bernstein (Neutral/Bullish on Apple's new features):

    "Apple’s new features [will] not only power a stronger device upgrade cycle but also push the company to $8 in earnings per share and potentially convince investors to pay close to the stock’s peak valuation."

  • Atif Malik, Citigroup (Bullish on Apple's WWDC event):

    "[This is] the best WWDC ever... The plan hinges on Apple’s advantage in hardware and software integration while maintaining user privacy."

  • Amit Daryanani, Evercore ISI (Bullish on Apple's AI capabilities):

    "Apple's lead in silicon will help it handle inferencing while its trove of user data should help it offer unique generative AI optionality."

  • David Vogt, UBS (Bearish/Neutral on Apple's AI strategy):

    "The announcement of Apple Intelligence was a bit disappointing relative to expectations... we maintain the view that Apple’s AI strategy will not lead to a significant iPhone upgrade cycle this fall."

  • Tim Long, Barclays (Neutral/Bearish on Apple's AI announcements):

    "[These are] more of an evolution and only matching expectations... We believe the event was not a catalyst from a stock standpoint as no new hardware was announced and the software features are not meaningful."