AI iPhone Hype Pushes Apple to $3 Trillion Ahead of WWDC

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Apple's Worldwide Developers Conference starting Monday will finally showcase the iPhone maker's artificial intelligence game plan, according to reports, as investors and Apple customers alike eagerly await the iPhone. What will emerge as the next big event to push forward the decline in sales?

Key facts

Apple CEO Tim Cook will deliver the keynote address at the annual WWDC event on Monday at 1 p.m. ET, an event that typically brings big software and product updates (last year's big-ticket WWDC announcement was Apple's Mixed reality was the Vision Pro headset).

This year's WWDC is widely expected to be the first look at Apple's generative AI initiatives, according to Bloomberg, which reported that Apple is planning to use viral chat GPT chat for future iPhones. will unveil improved capabilities for bot integration and existing AI. Message reply suggestions and Siri-like features.

Apple, which has previously been relatively quiet on AI compared to big technology peers like Microsoft and Google, will show this week whether it can “successfully work with the rest of the industry” despite a perceived delay in investing in AI. has taken,” JPMorgan analyst Smek Chatterjee wrote last week, discrediting WWDC for investors.

Perhaps most important for Apple's bottom line, and thus its share price, is whether it can resume declining iPhone sales as smartphone users show interest in AI offerings. , Chatterjee announced that the WWDC event would “successfully trigger an upgrade cycle” for the iPhone, boosting sales of an estimated 1.5 billion iPhones.

Apple is jockeying for a combination of “increasing demand and very rich” average selling prices, Loop Capital analyst Anand Barwah summarized Monday, noting that it's likely only the latest iPhone 15 line and the iPhone 16 slated for a fall release run all AI software without performance issues.

Bernstein analyst Tony Sacconaghi noted in a top watchpoint for Apple stock on Monday that the company would not have any details of its reported arrangement with Microsoft-backed OpenAI, the maker of ChatGPT. lifts the lid, speculating that this is likely a revenue share model.

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What to watch for?

According to Chatterjee, the top “watch point” at WWDC will be whether Apple demonstrates that it will be ready to launch generative AI in iPhone-specific applications such as Siri and iMessage by September. Chatterjee added that he expects the upgrade cycle, in which an estimated 1.5 billion iPhone users trade in their current smartphones for the latest model, to begin this year before accelerating in 2025. Because macroeconomic conditions are likely to improve and consumers are increasingly hungry for AI-heavy smartphones. .

What we don't know

If WWDC Affects Apple Stock Given AI Hype “Historically, WWDC has not been a material stock catalyst for Apple … We think this year is different as Apple formally enters the race for general AI,” Morgan Stanley analysts led by Eric Woodring wrote. It is predicted. Apple shares fell about 1% on Monday morning but are up about 7% over the past month.

Key background

The past year has been unusually cold for Apple investors, as the stock's 7% return is worse than the S&P 500's 25% return and rival Microsoft's 23% return. Microsoft, which overtook Apple as the world's most valuable company earlier this year, has more clearly translated its keen interest in AI into earnings growth than Apple, whose first-quarter net income 20 percent higher than the same period in 2023, which is much better. Apple's -2 percent bottom line growth. Apple has been relatively quiet in discussing its AI offerings to the public, although its chief executive Tim Cook said in February that the company has put “tremendous time and effort” into creative AI. Aside from agitation over Apple's unclear path to monetizing AI, the biggest point of investor frustration is the decline in its core China business, with sales in the region expected to drop from a record $74.2 billion in 2022 to 7%. The percentage is expected to be lower, according to FactSet.

Further reading

ForbesApple's earnings are less painful than fear coming into a hot China.

ForbesHow big can Nvidia get as it threatens Apple and its $3 trillion market cap?

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