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Apple Shares Hit $203, Surge 5% on New AI Launch

Apple shares surge 5% to a record $203 after unveiling new AI features at developer conference.

6/11, 11:33 EDT
Apple Inc.
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Key Takeaway

  • Apple shares surged 5% to a record high of $203 after unveiling new AI features at its developer conference.
  • New AI functionalities, including Siri integration with ChatGPT, are expected to drive iPhone upgrades and boost revenue.
  • Analysts are optimistic, with Morgan Stanley setting a $216 price target and D.A. Davidson upgrading Apple to buy with a $230 target.

Apple Shares Hit Record High

Apple shares surged 5% to a new record high of around $203 per share on Tuesday, following the company's announcement of its long-awaited push into artificial intelligence (AI) at its annual developer conference on Monday. The stock's rise surpassed its previous record from December 14. The developer conference was a significant event for investors who have been keenly observing how Apple plans to leverage the ongoing AI boom.

Apple introduced a range of new AI features, including an overhaul of its voice assistant Siri, integration with OpenAI’s ChatGPT, writing assistance tools, and customizable emojis. These features are designed to be user-friendly, though they will require users to upgrade their iPhones to access them. Analysts from Morgan Stanley noted that Apple’s AI features strongly position the company with “the most differentiated consumer digital agent.” They believe these features will drive consumers to upgrade their iPhones, potentially accelerating device replacement cycles.

AI Features and Market Impact

The new AI features, collectively termed "Apple Intelligence," are compatible with devices running the M1 chip, such as iPad Air, iPad Pro, and Macs. However, they will only support the 2023 iPhone 15 Pro Max and iPhone 15 Pro, not the regular iPhone 15. This could drive new iPhone upgrades this fall. Apple announced $45.96 billion in iPhone revenue during the second quarter, down nearly 10% from the year-ago quarter, indicating weak demand for the current iPhones released in September.

Apple Intelligence will offer various functionalities when it launches in beta this fall. It can proofread and rewrite text, create custom emojis called “genmoji,” search for specific messages, summarize and transcribe phone calls, and show priority notifications. It can also tap into OpenAI’s ChatGPT to provide more detailed answers from Siri.

Analyst Reactions

Analysts from multiple institutions have expressed optimism about Apple’s AI announcements. Morgan Stanley analysts believe the features will drive a multi-year product refresh, underpinning their overweight rating and a $216 price target, with a bull case valuation of $270. Bank of America analysts also maintained their buy rating on the stock, citing the potential for a multi-year upgrade cycle, gross margin upside, and services growth.

Evercore analysts 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. They noted that restricting Apple Intelligence to iPhones sold within the last year adds to their conviction that AI can help kick off an iPhone super cycle.

D.A. Davidson analyst Gil Luria upgraded Apple to buy and raised his price target to $230 per share from $200, suggesting roughly 19% upside from Monday’s $193.12 close. Luria compared Apple’s AI announcement to previous milestone moments, such as the transition of digital music to iTunes. He believes Apple is uniquely positioned to offer these capabilities due to its consumer trust and integrated functionality.

Street Views

  • Morgan Stanley Analysts (Bullish on Apple):

    "Apple’s AI features strongly position the company with 'the most differentiated consumer digital agent.' Additionally, the features will drive consumers to upgrade their iPhones, which should 'accelerate device replacement cycles.'"
    "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 OW rating, $216 price target, and $270 bull case valuation."

  • Bank of America Analysts (Bullish on Apple):

    "The features will lead to 'an upgrade cycle for AI enabled IntelliPhones.'"

  • Evercore Analysts (Bullish on Apple):

    "Restricting Apple Intelligence to iPhones sold within the last year adds to our conviction that AI can help kick off an iPhone super cycle."