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Wedbush: Apple AI-driven super cycle about to begin

Published 06/24/2024, 05:30 AM
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Wedbush analysts believe the market is starting to recognize that with Apple (NASDAQ:AAPL) Intelligence on the horizon, Apple’s “AI-driven super cycle is about to begin.”

According to the investment firm, tech giants like Meta (NASDAQ:META) and Google (NASDAQ:GOOGL) will likely need to integrate their AI models into Apple Intelligence, as Apple's iOS ecosystem, encompassing 2.2 billion devices and 1.5 billion iPhones, holds the keys to this vast market.

“We expect developers over the next 6 to 12 months will build hundreds of generative AI-driven apps that will be key ingredients in the recipe for success for Apple as its technology stack creates the core building blocks of the consumer AI tidal wave we see coming starting with iPhone 16 in mid-September,” analysts wrote.

Apple’s partnership with OpenAI paves the way for developers worldwide to focus on iOS 18, creating numerous monetization opportunities for the iPhone maker, analysts noted.

They believe the market is underestimating the potential impact, estimating incremental high-margin Services growth of $10 billion annually for Apple. This partnership is expected to launch a new multi-pronged AI revenue stream, driven by both hardware and software.

Wedbush also pointed out that signs of iPhone stabilization are emerging based on recent supply chain checks in Asia, which bodes well for the upcoming iPhone 16 upgrade cycle. After a better-than-expected March quarter, optimism for iPhone growth is appearing in various markets.

The firm expects that June will mark the last negative growth quarter for China, with a growth turnaround expected to begin in the September quarter.

“China remains the linchpin of growth for Apple and now this key region is set to see growth once again starting with iPhone 16 in our view,” it said in a note, reiterating an Outperform rating and a $275 price target on the stock.

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