That’s The Takeaway from this morning’s Brief, which you can do register to receive in your inbox every morning along with:
Showing up late to a party has its perks. Just ask Apple.
While Tim Cook’s first peers were stumbling over AI missteps, boardroom drama and a public backlash, he walked through the door carrying an Apple Intelligence pan and Wall Street analysts were ready with a drink.
On Monday, the company hit an all-time high after Morgan Stanley called Apple a top pick. It raised its price target on an expected upgrade cycle driven by Apple’s upcoming AI platform.
“Apple Intelligence is a clear catalyst to increase iPhone and iPad shipments,” Morgan Stanley analysts wrote.
The fact that Apple’s yet-to-be-released AI tools will be available to just 8% of existing iPhone and iPad users strengthens the case for an abnormally large upgrade cycle, they said. Add in an already large user base and a replacement cycle that’s stretched to almost five years, and there’s a recipe for a lot of people looking for new hardware.
It’s a testament to Apple’s AI strategy and the smart ways it’s presented what AI tools can do for you. By relentlessly emphasizing everyday use cases, Apple has managed to pare AI’s most hysterical promises into something accessible (and monetizable) within its own ecosystem.
Before Apple’s AI launch, Cupertino skeptics pointed to public fatigue with the upgrade, slowing iPhone growth and a saturated US smartphone market. Recent hardware releases also fueled complaints about a lack of pizzazz, fueling a narrative that Apple’s glory days were behind it.
When the company ended its electric car project in February, it seemed that Apple was abandoning a bold initiative and giving in to the AI fad. But that inflection point looks different now. With more insight into Cook’s services-oriented approach to AI, the company’s AI strategy looks less like that of Google and Microsoft and more like an extension of its own walled garden.
Loop Capital compared the potential of Apple’s AI to previous generations’ shift in technology.
Twenty years ago, the iPod was the platform through which many consumers experienced digital content. Then came the iPhone, which of course was also “late” but redefined the category as the iconic device became the foundation for social media.
And now, through generative AI, managing director Ananda Baruah wrote on Tuesday that Apple’s AI platform will become the “base camp” of choice for consumers.
What’s surprising about Wall Street’s massive support, however, is that Apple never got over the hardware trap that its critics claimed had trapped it. While AI technology and its use cases may seem revolutionary, the business implications for Apple are very conventional: people will buy more phones.
This is not a paradigm shift that changes the world. But this is a reliable way to earn money.
Hamza Shaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.
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