KEY TAKEAWAYS
- Apple shares rose to a record high Tuesday, a day after the iPhone maker announced its iOS 18, Apple Intelligence, and an artificial intelligence (AI) partnership with OpenAI.
- JPMorgan analysts said Apple’s AI announcements reinforced the likelihood that an iPhone upgrade cycle is coming.
- Melius Research analysts said that older iPhone models could become “obsolete,” driving a “Super Cycle” that would support growth for Apple.
Apple (AAPL) shares rose to a record high in intraday trading Tuesday, a day after the iPhone maker held its long-anticipated Worldwide Developers Conference (WWDC) keynote where it unveiled iOS 18 supercharged by Apple Intelligence and an artificial intelligence (AI) partnership with OpenAI.
Shares were up over 5% at $203.78 around 11:30 a.m. ET Tuesday, contributing to a more than 5% gain since the start of the year.
Anticipation of AI-Fueled Growth Driven by iOS 18, Apple Intelligence, OpenAI Partnership
The iPhone maker kicked off WWDC with the announcement of its latest operating system, iOS 18, and Apple Intelligence, a personal intelligence system that uses content on each user’s device as context to provide personalized intelligent assistance. Apple also announced a partnership with Microsoft-backed (MSFT) OpenAI to integrate ChatGPT into iOS 18 later this year.
The iOS 18 update will be available in the fall as a free software update for iPhone Xs and newer devices. Apple Intelligence will be available in beta as part of iOS 18 in the fall on iPhone 15 Pro, iPhone 15 Pro Max, and iPad, as well as Macs with an M1 chip or later.
JPMorgan analysts said, “Apple’s keynote at WWDC showcased enough enhancements on the feature sets across native apps and third-party apps with integration of A(pple) I(ntelligence) to assure us of the expected upgrade cycle with the launch of the iPhone 16 and release of iOS18 in the fall of this year.”
How AI Could Be Game Changing for Apple
The new generation of Apple tech could fuel an accelerated device upgrade cycle as consumers migrate to devices integrated with AI.
Wedbush analysts wrote they “believe Apple’s AI strategy will leverage its golden installed base around personalization and LLMs on the phone that should change the growth trajectory of Cupertino,” and “spur an AI driven iPhone upgrade cycle starting with iPhone 16.”
“Apple is taking the right path to implement AI across its ecosystem while laying out the foundation for the company’s multi-year AI strategy across the strongest installed base of 2.2 billion iOS devices over the coming years,” the analysts said.
“Older stuff will be obsolete if you want AI—including all those iPhones bought during Covid,” Melius Research analysts said, adding they “now have more conviction in our Super Cycle thesis that could even result in iPhone revenue growth of about 20% for up to 2 years.”
The analysts said they expect the AI-driven upgrade cycle could start gradually in September through fiscal 2025 and peak in the second half of the 2026 calendar year.
