Investors at Apple Inc. have reacted favorably to the company’s release of its artificial intelligence roadmap, sending the stock to a record high this week.
Wall Street is speculating that users who have been holding onto older smartphones would undergo a big upgrade cycle as a result of the new iPhone AI features, which include Apple’s deal with OpenAI to incorporate ChatGPT.
According to Jim Awad, senior managing director at Clearstead Advisors, 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.” “AI will greatly benefit Apple, and the stock is finally catching up.”
The stock of the iPhone manufacturer had a decline on Friday, but it still ended the week with a roughly 8% gain—the highest level since May. For the first time since December, the surge propelled Apple back into record territory, adding around $239 billion to its market value.
- On excitement about AI, Wall Street’s top stocks have quickly reorganized. On Thursday, Apple surpassed Microsoft Corp. to become the largest firm based on market value. As of Monday, Apple was the third-largest, lagging behind $3.2 trillion. Microsoft and Nvidia Corp. have been in the lead since January.
Apple’s event allayed fears that had been plaguing the market this year, despite being perceived as lacking in surprises. Wall Street was concerned that the company did not have an AI strategy, particularly given that its growth has lagged behind other megacaps and that its valuation is high. Gains in share prices have been restrained as a result; out of the Magnificent Seven, only Tesla Inc. has performed worse, down 28%.
In Apple’s fiscal second quarter, revenue decreased by 4.3%, marking the fifth decline in the previous six quarters. It trades at around 30 times projected profits, which is higher than both the Nasdaq 100 Index’s roughly 27 times multiple and its long-term average.
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Based on figures provided by Bloomberg, the iPhone is by far Apple’s biggest product, making up over half of the company’s revenue in the fiscal year 2023. However, due to people holding onto their phones longer, iPhone revenue decreased by 2% in the previous year. Bulls contend that AI embodies the kind of essential qualities that will drive them to upgrade.
Robert Pavlik, senior portfolio manager at Dakota Wealth Management, stated that “people who weren’t excited about the initial announcement are fast becoming believers that AI is the innovation that will spur the next cycle of iPhone sales.” “It will take time to see confirmation in the numbers, and we need to be realistic, but AI has the potential to create the kind of growth that will make the stock appear cheap.”
Melius Research analyst Ben Reitzes stated, “If you want AI, older stuff will be obsolete.” “We 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 author writes, considering the allure of AI.
Additionally, the expectation of an iPhone refresh cycle has helped Apple suppliers. While Cirrus Logic Inc. set a record on Thursday, Skyworks Solutions Inc. is up 15% this week, its largest one-week percentage gain in four years. This is Qorvo Inc.’s finest week since 2020.
D.A. Davidson analyst Gil Luria upgraded his rating to buy and stated that the incorporation of capabilities like improved search, improved photo editing, and text generation “will drive much broader adoption of AI than we have seen to date.” “Apple may be the only company able to provide these capabilities anytime soon, and it is in a unique position to do so.”