Apple released the second phase of its Apple Intelligence features today, with many calling it a trigger for future growth and stock price appreciation. With the company’s track record of innovation and a unique ecosystem, there is no denying the fact that success is almost guaranteed. However, the high expectations associated with these rollouts can often hurt the stock price, which investors need to carefully navigate.
The Apple Intelligence update expands on the existing features that Apple has already rolled out on iPhone, iPad, and Mac in select locations and languages.
An Apple store displaying the latest in consumer electronics, from smartphones to wearables.
It integrates OpenAI’s ChatGPT into Siri and the writing tools. Additional features include the ability to create 3D images and animations in Messages and other apps, emojis from text prompts, and transform simple sketches into images. Visual Intelligence adds camera controls that should improve user productivity.
While these features may be the center of attention for most Apple users, we’re here to see them from the investor’s perspective. Apple stock is slightly underperforming the S&P this year. While rivals continue to ride the AI wave, Apple is taking its time. This has impacted the share price negatively.
However, the new Apple Intelligence features may well trigger a new rally in the stock. This quarter is important because Apple finally seems to have fixed its China issues. iPhone sales in China picked up despite a delay in the Apple Intelligence rollout in the country. Eventually, iPhone growth will slow down. But the large userbase forms the backbone of Apple’s ecosystem and slower growth won’t automatically be a red flag for the company, even though bears want everyone to think that way.
Apple’s iPhone sales are wrongly considered to be the driver of the company’s future revenues in our opinion. We believe the monetization of the user base will continue to drive growth, irrespective of how many more users Apple manages to add to this base.
Services like AppleCare, Apple Pay, and iTunes will form the backbone of this monetization. Apple also claims to power most of the features it offers in its iPhones on the device itself. This may also mean that the compute required for AI features may in the near future be bought from the cloud, which would add another layer of income stream for the company.
In short, the new rally is around the corner. Apple may be late to the AI party, but it could well outshine everyone else once it starts to roll.
Apple ranks 8th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 158 hedge fund portfolios held AAPL at the end of the second quarter which was 184 in the previous quarter. While we acknowledge the potential of AAPL as a leading AI investment, our conviction lies in the belief that some 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 as promising as AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article was originally published at Insider Monkey.
