Apple’s Worldwide Developers Conference next week will shed light on whether the iPhone maker’s artificial intelligence status is indeed up to par with its more in-vogue Silicon Valley peers, JPMorgan analysts argued in a Tuesday note, as investors eagerly await what some paint as the next major event to drive slumping iPhone sales.
Tim Cook, chief executive officer of Apple, speaks during a launch event for the Apple iPhone 15 ... [+]
Apple’s annual event will “highlight whether Apple has successfully caught up with the rest of the industry, despite a perceived delay in relation to investments in AI,” according to JPMorgan’s Samik Chatterjee.
Chatterjee said he expects the WWDC event will “successfully catalyze an upgrade cycle” for the iPhone, a much-needed tailwind for Apple as iPhone sales are expected to be the weakest since 2020 during the current quarter, according to consensus analyst forecasts compiled by FactSet.
Chatterjee added he anticipates the upgrade cycle, in which the estimated 1.5 billion iPhone users trade in their existing smartphones for the newest model, will begin this year before accelerating in 2025 as macroeconomic conditions are likely to improve and consumers grow hungrier for AI-heavy smartphones.
The top “watchpoint” at WWDC will be whether Apple reveals it will be ready to launch generative AI across iPhone-specific applications like Siri and iMessage by September, according to Chatterjee.
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If WWDC impacts Apple stock given the AI hype. “Historically, WWDC is not a material stock catalyst for Apple...we think this year is different as Apple formally enters the Gen AI race,” prognosticated Morgan Stanley analysts led by Erik Woodring.
If WWDC impacts Apple stock given the AI hype. “Historically, WWDC is not a material stock catalyst for Apple...we think this year is different as Apple formally enters the Gen AI race,” prognosticated Morgan Stanley analysts led by Erik Woodring.
Shares of Apple were down slightly in Tuesday trading, but still sit within 1% of hitting a $3 trillion market capitalization for the first time since January. The last year has been an unusually cool stretch for Apple investors, as the stock’s 7% return is worse than the S&P 500’s 25% and rival Microsoft’s 23% return. Microsoft, which overtook Apple as the world’s most valuable company earlier this year, has more tangibly translated the intense interest in AI into earnings growth than Apple, with its first-quarter net income 20% higher than the same period in 2023, far better than Apple’s -2% bottom line growth. Apple has been fairly quiet in discussing its AI offerings to the public, though its chief executive Tim Cook said in February that the company has put a “tremendous amount of time and effort” into generative AI. Other than agita about Apple’s unclear path to monetize AI, the largest point of investor frustration has been a decline in its key China business, with sales in the region expected to come in 7% lower than 2022’s record $74.2 billion, according to FactSet.