Apple Set to Outperform Nvidia, Hits $206 on AI Boost

Apple's AI announcement boosts stock 6.7% to record $206.03, analysts predict up to 19% further upside.

By Bill Bullington

6/11, 15:14 EDT
Apple Inc.
NVIDIA Corporation

Key Takeaway

  • Apple's AI announcement, including OpenAI’s ChatGPT integration, boosted its stock to a record $206.03, with analysts predicting up to 19% upside.
  • Analysts are divided on the impact of Apple's AI strategy; some see it driving an iPhone upgrade cycle while others remain skeptical.
  • Nvidia's market dominance continues with a 200% surge over 12 months and a significant S&P 500 weighting, potentially reaching unprecedented levels.

Apple’s AI Announcement

Apple's recent unveiling of its artificial intelligence (AI) vision during the Worldwide Developers Conference has garnered significant attention from Wall Street. The company introduced Apple Intelligence, which includes integrating OpenAI’s ChatGPT and enhancements to its Siri digital assistant. This announcement led to a notable rise in Apple’s stock, which climbed as much as 6.7% to a record $206.03 intraday on Tuesday, marking its first all-time high since last December.

Analysts have responded positively to these developments. Gil Luria from D.A. Davidson upgraded Apple shares to a buy and increased the price target to $230 from $200, suggesting 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, emphasizing Apple’s potential to drive deeply integrated functionality. Goldman Sachs analyst Michael Ng highlighted the financial implications, noting that the new features could fuel an iPhone upgrade cycle and create opportunities for AI monetization. Morgan Stanley’s Erik Woodring also expressed optimism, forecasting a rapid device replacement cycle and predicting 227 million units in fiscal 2025, rising to 238 million units in fiscal 2026.

Market Reactions and Analyst Views

The market has shown a mixed reaction to Apple’s AI announcements. While many analysts are optimistic, some remain skeptical. UBS analyst David Vogt expressed disappointment, stating, “The announcement of Apple Intelligence was a bit disappointing relative to expectations in our view.” Vogt maintained that Apple’s AI strategy might not lead to a significant iPhone upgrade cycle this fall. Similarly, Barclays analyst Tim Long viewed the AI announcements as “more of an evolution” and not a significant catalyst for the stock, noting the lack of new hardware and the limited impact of the software features.

Despite these differing opinions, the overall sentiment leans towards a positive outlook for Apple. Bernstein’s Toni Sacconaghi expects the new features to drive a stronger device upgrade cycle and potentially push the company to $8 in earnings per share. Citigroup analyst Atif Malik praised the conference as the “best WWDC ever,” highlighting Apple’s advantage in hardware and software integration and its partnership with OpenAI. Evercore ISI’s Amit Daryanani also emphasized Apple’s lead in silicon and its unique generative AI optionality.

Nvidia’s Market Position

While Apple’s AI announcements have captured attention, Nvidia continues to dominate the market. The chipmaker has seen a 200% surge over the past 12 months, pushing its market value above $3 trillion. Nvidia’s current weighting in the S&P 500 has grown to 6.6%, making it one of the top players alongside Microsoft and Apple. Evercore ISI analyst Mark Lipacis predicts that Nvidia could one day dominate the S&P 500 by an unprecedented magnitude, potentially reaching a 15% weighting.

Lipacis noted that each successive computing era has seen ecosystem players represent a larger weighting of the S&P 500. He pointed out that Digital Equipment Corporation, Nokia, and Apple each dominated their respective periods, and Nvidia’s dominant position in parallel processing could lead to a similar outcome. Lipacis advised clients to continue buying Nvidia shares, believing they are still trading at a reasonable multiple. Nvidia is already responsible for about 37% of the S&P 500’s year-to-date 12% return.

Street Views

  • Jonathan Krinsky, BTIG (Bullish on Apple):

    "Mega-cap tech remains the bright spot, but we suspect that will ultimately succumb to the weak breadth... Apple was poised to break out to a new high."