We recently published a list of Famous Analyst Says You Should Buy the Dip on These AI Stocks. Since Apple Inc (NASDAQ:AAPL) ranks 3rd on the list, it deserves a deeper look.
Gene Munster, managing partner at Deepwater Asset Management, said in a latest interview with CNBC that the key reason behind the latest decline in tech stocks was major companies projecting high CapEx and giving no updates on AI monetization. Munster, however, thinks AI spending is necessary for these companies to reap rewards in the future. Munster referred to a latest interview of Mark Zuckerberg in which he said if his company does not keep spending on AI it may miss the biggest opportunity in the next 10-15 years. Munster said Zuckerberg believes this AI spending “cannot slow down.”
“I am most optimistic because that CapEX number, if you’re gonna boil it down to one point, it’s gonna be higher for longer and it’s good for AI.”
Asked whether investors should stick with mega-cap AI stocks or move on to smaller companies that could benefit from this AI spending, Munster said that depends on to what degree you believe in the transformative power of AI.
“If you are in my camp.. which I think it (AI) will be more transformative than the internet, then small companies and the big companies are going to participate.”
Munster thinks the AI-led bull market could last for 3-5 years before ending in what he called a “spectacular bubble burst.”
For this article we picked the AI stocks Gene Munster and his firm Deepwater Asset Management hold, according to the disclosures on CNBC. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 150
Gene Munster continues to be bullish on Apple.
Does Apple Inc (NASDAQ:AAPL) have any AI growth catalysts? Wall Street is turning bullish on the company after Apple revealed Apple Intelligence plans at the WWDC event.
Morgan Stanley expects Apple Inc (NASDAQ:AAPL) to ship nearly 500 million iPhones in the next two years, marking a 6% increase from the FY21-FY22 cycle. Morgan Stanley said this growth can boost the annual iPhone average selling price (ASP) by 5%, leading to nearly $485 billion in revenue and $8.70 in earnings per share by FY26, exceeding consensus estimates by 7-9%.
Wall Street is expecting a new AI-powered refresh cycle for iPhones because it’s been years since millions of users upgraded their iPhones. Wedbush recently said 270 million, of 1.5 billion iPhones, have not upgraded in 4+ years
Apple Inc (NASDAQ:AAPL) is also training Siri based on its own language models. These smaller models run on devices, handling various daily tasks, with Apple revealing its on-device model has 3 billion parameters. For more complex tasks, a larger language model runs on Apple Inc (NASDAQ:AAPL) private servers, though its size is undisclosed and likely smaller than current large language models like OpenAI’s GPT-4, which has around 1.8 trillion parameters.
Polen Focus Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“The largest relative detractors in the quarter were NVIDIA, Apple Inc. (NASDAQ:AAPL), and Salesforce. In a reversal from some of the concerns driving the stock down in the first quarter, Apple re-emerged as a top performer in the second quarter. The company reported better-than-feared results in its iPhone segment that quelled concerns over weakness in China. Additionally, the company forecast a return to sales growth and announced a $110 billion stock buyback plan, the largest in U.S. history. Later in the period, at its Worldwide Developers Conference, Apple introduced long-awaited new AI features that spurred some optimism around an upgrade cycle for the iPhone and, more generally, the important role Apple may be able to play in the emerging AI landscape. We continue to study Apple closely, which we previously owned the company for many years during its growth phase, to determine if it is poised for another significant revenue and earnings growth period.”
Overall, Apple Inc (NASDAQ:AAPL) ranks 3rd on Insider Monkey’s list titled Famous Analyst Says You Should Buy the Dip on These AI Stocks. While we acknowledge the potential of Apple Inc (NASDAQ:AAPL) , our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.