Apple Has $230 Billion Week on Bet AI IPhones Are Must-Haves

Apple Inc. investors finally have a roadmap for how it will use artificial intelligence — and they’ve responded by pushing the stock to a record high this week.

Wall Street is betting that new iPhone AI features — including Apple’s agreement with OpenAI to integrate ChatGPT — will spur a massive upgrade cycle among users who have been holding on to older devices.

Wall Street is betting that new iPhone AI features – including Apple’s agreement with OpenAI to integrate ChatGPT – will spur a massive upgrade cycle among users who have been holding on to older devices.

Investors have “more confidence that Apple is back in the game, that it has caught up competitively, and that it will see a re-acceleration of growth, given the installed base of phones that will need to upgrade to take advantage of this new tech”, said Jim Awad, senior managing director at Clearstead Advisors. “Apple will be a major beneficiary of AI, and the stock is catching up.”

Wall Street’s top stocks have quickly re-shuffled on AI optimism. Apple on Thursday overtook Microsoft as the biggest company by market capitalisation. Apple was third-largest as recently as Monday, trailing behind US$3.2 trillion Nvidia, and Microsoft, which held pole position since January.

While seen as short on surprises, Apple’s event eased concerns that have weighed on the stock this year. Wall Street had fretted that the firm lacked an AI strategy, especially since its growth has been wanting compared with other megacaps, and its valuation is elevated. That has kept a lid on share-price gains; among the Magnificent Seven, only Tesla – down 28 per cent – has seen a weaker performance.

For a few hours on Wednesday, Microsoft lost the pole position, but managed to finish the day very narrowly back on top with a valuation of US$3.27 trillion. Apple stood at US$3.26 trillion

Artificial intelligence features seen triggering upgrade cycle
Apple shares on track for best weekly gain since May

On Monday, Apple unveiled a new AI platform called Apple Intelligence that will be gradually added to a new version of the iOS 18 operating system.

The technology will only be available on Apple‘s highest-end hardware, forcing interested customers to pay premium prices to enjoy the AI capabilities.

Analysts, while initially lukewarm, have grown to believe that the iPhone’s new powers will motivate the company’s 1.5 billion-strong user base to update their phones in order to take advantage of the AI features.

In an interview, Apple CEO Tim Cook explained the company has carefully embraced generative AI, “which has its downsides,” but that the ChatGPT-style technology “was never off the table.”

“It was always about pursuing it in a thoughtful way,” he told the Marques Brownlee podcast on Wednesday.

“We’ve implemented it in ways that are less likely to create issues” on violating data privacy, he said. AFP

The iPhone maker’s shares fell on Friday but still managed to close the week with a nearly 8% advance, the stock’s best since May. The rally added about $239 billion in market value and pushed Apple back into record territory for the first time since December.

Wall Street’s top stocks have quickly re-shuffled on AI optimism. Apple on Thursday overtook Microsoft Corp. as the biggest company by market capitalization. Apple was third-largest as recently as Monday, trailing behind $3.2 trillion Nvidia Corp, and Microsoft, which held pole position since January.

While seen as short on surprises, Apple’s event eased concerns that have weighed on the stock this year. Wall Street had fretted that the firm lacked an AI strategy, especially since its growth has been wanting compared with other megacaps, and its valuation is elevated. That has kept a lid on share-price gains; among the Magnificent Seven, only Tesla Inc. — down 28% — has seen a weaker performance.

Revenue fell 4.3% in Apple’s fiscal second quarter, the fifth contraction in the past six quarters. Despite that, it trades at about 30 times estimated earnings, above its long-term average and the roughly 27 times multiple of the Nasdaq 100 Index.

The iPhone is by far Apple’s biggest business, accounting for more than half its fiscal 2023 revenue, according to data compiled by Bloomberg. However, iPhone revenue fell 2% last year, a reflection of how millions are holding onto their phones for longer. AI, bulls argue, represents the kind of must-have features that will prompt them to trade up.