After rising more than 23% in the past three months, Apple (NASDAQ: AAPL) stock has made up for a slow start to the year. Despite the hot run entering (and following) the company’s WWDC (worldwide developer conference) and Apple Intelligence announcement, AAPL stock still lags behind most members of the Magnificent Seven. That could change as Apple looks set to add to its supply ahead of what could be a powerful device to emerge in the back half of 2024. As such, I’m staying positive as a possible supercycle of the AI device looks set to play out over the next 18 months.
Daniel Ives of Wedbush Securities, one of the bulls also predicting an AI-driven supercycle, recently redoubled his delight, referring to Apple CEO Tim Cook as worthy of sharing the title of “Godfather of AI ” with Nvidia (NASDAQ: NVDA) senior chef Jensen Huang.
Although only time will tell if Tim Cook’s AI strategy will propel AAPL stock to the forefront of AI, I think many investors probably won’t be convinced of the full extent of Apple’s capabilities until they get a chance to try it later Apple Intelligence. this year.
The AI supercycle won’t just rock the iPhone
The good news is that existing iPhone 15 Pro users won’t need to upgrade their devices to get the significant AI improvements in store with iOS 18. For everyone else stuck on an outdated device, the iPhone The 16 could be the device that finally kicks off that long-awaited upgrade boom.
Given that Apple Intelligence is not exclusive to the iPhone, other hardware products are expected to receive a massive sales boost. Specifically, those with Macs or iPads that don’t have Apple Silicon chips may want to upgrade their hardware so that Apple Intelligence runs smoothly on all devices.
In any case, Apple finally has the “killer” software feature to convince people to upgrade all their devices to the latest and greatest. Indeed, Apple has not seen strength in iPhones, iPads and Macs since the days of the pandemic lockdown.
Perhaps Apple Intelligence can power an improvement cycle that tops the one it enjoyed through 2021. At that time, annual sales grew by nearly 30% in what was a drastic pullback in demand. This time, it’s not a work-from-home (WFH) boom or a pandemic-induced shutdown that could spur improvements; it’s the desire not to be left behind as HE finally gets that personal touch we all crave.
If Apple Intelligence lives up to the hype, then perhaps analysts are discounting Apple’s sales growth prospects. They may need to raise their price targets significantly heading into 2025 after getting the first hint of how the latest AI-enhanced iPhones perform in the last quarter of the year.
Apple’s silicon: A big advantage it has in the AI race
If Tim Cook is to become one of the “Godfathers of AI,” Apple not only needs to deliver a seamless Apple Intelligence experience later this year, but the company needs to continue to put its foot on the AI gas. Indeed, Apple Intelligence and its partnership with OpenAI are a good start. However, in the long term, Apple needs to ensure that it is accelerating forward in AI to further advance the AI race. In this regard, the firm must push Apple Silicon to the limit.
Apple Silicon has been successful in powering Apple’s modern products. However, we may all have experienced the tip of the iceberg, as we have not yet had the opportunity to throw truly intensive AI processes into it. With Apple Intelligence, we will perhaps unlock the full power of the Apple Silicon Apple Engine (ANE, Apple’s Neural Processing Unit (NPU)) and better understand the value of running AI models at hand.
Furthermore, with Apple reportedly planning to use M2 Ultra chips (the most advanced level in the M2 line) in Apple Private Cloud, perhaps Apple is leading the race in custom AI chips. Also, the M3 Ultra might not be far off.
Undoubtedly, other mega-cap tech titans are also planning to build their own AI accelerators for the data center. However, Apple may just beat them in the race for internal AI hardware and reduce dependence on third-party GPU manufacturers.
Considering the power of Apple’s silicon in the cloud and on the palm, I find it absurd that AAPL stock trades for just 28.4 times price-to-earnings (P/E), well below its smarter AI rivals Magnificent Seven as Nvidia (NASDAQ: NVDA), which works out to close to 50 times forward P/E.
Is Apple Stock a Buy, According to Analysts?
On TipRanks, AAPL stock comes in as a moderate buy. Out of 35 analyst ratings, there are 24 Buy, 10 Hold and one Sell recommendation. The average price target on AAPL stock is $217.19, implying a potential upside of 1.4%. Analyst price targets range from a low of $164.00 per share to a high of $275.00 per share.
Takeaway
Apple looks like a turtle with AI that can surprise everyone and win the race. With Apple Intelligence’s potential to kick off a device refresh cycle in late 2024 and 2025, perhaps the bulls are right to praise Apple, even after its recent implosion.
Additionally, Apple Silicon could allow the company to power its AI ambitions without relying heavily on third parties. Perhaps it’s not so strange to hear the likes of Daniel Ives refer to Apple’s top boss as a “godfather of AI.”
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