Apple‘s (NASDAQ: AAPL) announcement of Apple Intelligence has propelled its stock upward. The big question now becomes whether these gains will prove short-lived or if the stock can rally across the summer. We analyze the longer-term impacts of Apple’s push into AI. 

Can Apple’s Stock Keep Rallying After Its AI Announcement?

Key highlights from 24/7 Wall Street Analysts Austin Smith and Eric Bleeker include:

•  We’re now a couple of weeks past Apple’s WWDC announcement of Apple Intelligence. 
• Clearly, the market liked what Apple had to offer. Their stock was up more than 7% the day after the announcement. 
• So, the question becomes: Is Apple now another stock riding optimism around AI, or did investors miss their chance?
• We published an article on May 27h – two weeks before the WWDC event where Apple announced its new AI initiative – predicting it would rally through the summer.
• The key point from this article was that Apple had previously been lagging other technology companies precisely because it lacked a “narrative” in artificial intelligence.
• But, thanks to Apple Intelligence, that liability was about to become an asset. 
• While other companies that fall behind in AI will have a hard time catching up, Apple is in a unique position. 
• Simply put, Apple has the luxury of waiting until a lot of the consumer-facing technologies in AI are more mature, they don’t need to be on the bleeding edge like other companies chasing market share in smartphones and PCs. 
• And that’s exactly what Apple has done.
• They’ve waited for AI to keep maturing before making their move. Apple still has its entire install base, and now it can begin adding these features without having lost any ground to rivals. The key challenge isn’t so much market share as increasing the upgrade rate at which users buy iPhones and other Apple products. 
• Turning to Intelligence as a feature, it seems genuinely useful. 
• You have fun things like AI to create custom Emojis, and then practical uses like better Siri, and an emphasis on personalized actions like summarizing texts and notifications 
• Apple has a big advantage here as they have huge amounts of local processing on phones and a focus on privacy. OpenAI, the company that makes ChatGPT, must focus on huge models that are general purpose.
• However, Apple actually has a unique entry point into offering AI features in that they’ve focused on keeping data private and can be more tailored to users. 
• As far as Apple Intelligence’s impacts to their share price, the biggest impact is you need an iPhone 15 to run Apple Intelligence features. That’s Apple’s newest phone. 
• The company’s greatest challenge, and greatest catalyst to the stock, is creating a compelling reason for users to upgrade their phones at a more rapid rate. 
• A faster upgrade rate creates the much-vaunted “Supercycle” of revenues that’s now being talked about in the second half of Apple’s year. 
• Eric’s personal belief is Apple is going to outperform as Apple Intelligence is the most compelling reason to upgrade a phone in a long time and Apple should display its use very well in September when they host their next iPhone event.
• This doesn’t mean you’ll get something like a 50% return from Apple shares across the next year, but the company is now large enough that holding it as a larger stock holding and seeing something like a 15% or 20% return would be outstanding 
• It’s a stock investors can keep as a more outsized holding. Apple’s stock still has upside, and you can sleep easy at night owning a larger allocation of it. 

Transcript:

Eric, it’s been a couple of weeks after Apple’s WWDC announcement of Apple Intelligence, and clearly the market liked what Apple had to offer.

I mean, this stands in stark contrast to the Vision Pro recently, which the company has now walked back their projections on and they’ve accelerated their intentions to build a more affordable model.

But let’s talk about Apple Intelligence. Is Apple now finally an AI stock? The company was up more than seven percent the day after the announcement.

That’s an enormous amount for a company this size. And as you predicted in the video and article weeks before the event, that AI announcements would be the catalyst that caused Apple to rally through the summer.

So you nailed it. My question is, is Apple now another stock riding optimism around AI or did investors miss their chance? What’s going on here? Is there more juice left or is this just a one and done?

Yeah, it’s a great question. And the article I published was on May 27th and was named Prediction. This Magnificent Seven stock will rally through the summer.

If anyone watching wants to read the full explanation I provided with my details behind why I believe Apple would rally through the summer, they could search my name. It’s right here. And they could put that in a search box with rally through the summer.

They’ll find the article on 24-7 Wall Street’s website. It’s pretty detailed.

But the key point I wanted to make was, though Apple has been lagging other technology stocks precisely because it was behind in AI, what this time period is doing is it’s turning a liability into an asset.

Because other companies that fall behind in AI, they’re going to have a hard time catching up. Apple is in a truly unique position.

Simply put, they have the luxury of waiting until a lot of consumer-facing technologies are more mature. They don’t need to be at the bleeding edge.

Microsoft has to announce stuff at the bleeding edge because it’s trying to take market share back to its PCs. Apple can wait because they face fewer risks of losing market share.

And that’s exactly what they’ve done. They’ve waited for AI to keep maturing. They have their entire install base that they still maintain.

And now they can begin adding these features once they’re mature without having lost ground to rivals.

So Apple announced intelligence and a number of features and it seemed genuinely useful. You have a lot of things like AI to create custom emojis. They’ll definitely get some headlines and some good press, but then there’s practical uses like Siri that is just better, and an emphasis on personalized actions like summarizing text and notifications.

And this is where Apple has a big advantage here because they can rely on a huge amount of local processing, the processors actually on the phone, and a focus on privacy. Whereas open AI, they have to do all their processing on the cloud and they have to focus on a large model that’s more general purpose.

So again, Apple has a unique entry point of data and how they can bring their privacy focus into the age of AI. Now, as far as impacts, well, the biggest impact you need to be aware of is you need an iPhone 15, which is the most recent generation, to run Apple intelligence features.

The company’s greatest challenge and what can move the stock forward is creating a compelling reason for users to upgrade. And if they create a compelling reason for users to upgrade with it taking longer and longer for your average user to upgrade, what you do is you create a super cycle in revenue.

My personal belief is Apple is going to outperform as Apple Intelligence is the most compelling reason to upgrade a phone in a long time. And this should be on display very well when Apple announces their next phone in September and gets to put AI at the center of that marketing presentation.

So does this mean you’re going to get something like a 50% return across the next year if you buy Apple today? Probably not because it’s too big. But it’s the kind of company you can make an outsized holding and something like a 15% or 20% return from these levels would still be outstanding and it is within reach.

So that’s my personal plan that even after the current rise, I’m continuing to shift Apple to being a more outsized holding in my portfolio. I like the upside across the next 12 months and it’s a stock I can sleep very easy owning.

And, you know, Eric, for anybody who gets the impression that Apple’s late to this game or, you know, can you teach an old dog new tricks? I would remind investors that this is exactly out of the Apple playbook.

Apple has always been a fast follower and they’ve made billions of dollars to become the largest company on Earth by being a fast follower and then having a fully integrated technology. Just look at something like the AirPods. It’s an absolutely incredible product, but it doesn’t stand alone.

It’s an incredible product that generates billions of revenue because it’s so well integrated in the Apple ecosystem. And that’s really been the story of Apple’s products is that when you have that integration, you have your own local chips.

You really can make better use of this technology. So this is actually directly out of the Apple playbook. Although they might seem late to the AI race, really what they’re doing here is waiting for the technology to develop to a level where they can be that fast follower and make billions of dollars in their integrated ecosystem in only the way that Apple can.

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