Apple Inc. investors finally have a roadmap for how it will use artificial intelligence, and they have responded by driving the stock to its best week in more than two years.
Wall Street bet because the new functions of AI of the iPhone – including the company’s agreement with OpenAI to integrate ChatGPT– will spur a massive upgrade cycle among users who have been clinging to older devices.
Investors are “more confident that Manzana is back in the game, which has caught up competitively, and will see a reacceleration of growth, given the installed base of phones that will need to be updated to take advantage of this new technology,” he said. Jim Awadsenior managing director of Clearstead Advisors. “Apple will be one of the biggest beneficiaries of AI, and the stock is catching up,” she added.
The main values of Wall Street have quickly rearranged themselves thanks to optimism about the AI. Manzana surpassed on Thursday Microsoft Corp. as the largest company by market capitalization. The company was the third largest company as of Monday, behind Nvidia Corpwith 3.2 billion dollars, and Microsoftwhich had held the first position since January.
The manufacturer of iPhone is about to record its biggest one-week percentage rise since 2021, reaching a new all-time high. Since the April low, the stock has added more than $700 billion in market value. Buy ratings on the stock are near their highest since 2017.
Although there were not many surprises, the event Manzana eased concerns that have weighed on stocks this year. Wall Street He had feared that the company lacked an AI strategy, especially because its growth has been weak compared to other megacapitals and its valuation is high. This has slowed the rise in share prices; between the Magnificent Sevenonly Tesla Inc.which has fallen 27%, has had a weaker performance.
Revenue fell 4.3% in the company’s fiscal second quarter, the fifth contraction in the last six quarters. Despite this, it is trading at around 30 times estimated earnings, above its long-term average and the roughly 27 times multiple of the Nasdaq 100 index.
He iPhone It is by far the largest business in Manzanaas it represents more than half of its 2023 tax revenue, according to data collected by Bloomberg. However, device revenue fell 2% last year, a reflection of how millions of people are keeping their phones for longer. The AIthe bulls argue, represents the type of essential characteristics that will prompt them to change.
“People who weren’t excited by the initial announcement are quickly becoming convinced that the AI It is the innovation that will drive the next sales cycle of the iPhone“, he claimed Robert Pavlikportfolio manager Dakota Wealth Management. “We have to be realistic, and it will take time to see confirmation in the numbers, but AI has the potential to create the kind of growth that will make stocks look cheap,” he added.
The pool of users who could be in the market for an upgrade is potentially massive. According to Bloomberg Intelligencemore than 40% of the more than 800 million smartphone devices in Manzana are iPhone 12 or earlier, with another 27% of users in a iPhone 13. Less than 10% of current users have phones that can be updated to the software. AI.
The analyst of Melius Research Ben Reitzes wrote: “Older devices will become obsolete if you want AI”. Given the appeal of artificial intelligence, “we now have more conviction in our Supercycle thesis that could even result in revenue growth for the market.” iPhone of around 20% for a maximum of 2 years.”
The prospect of a mobile phone renewal cycle has also encouraged Apple’s suppliers. Skyworks Solutions Inc. is up 17% this week, its biggest one-week percentage gain in four years, while Cirrus Logic Inc. has broken records. Qorvo Inc. is having its best week since 2020.
The integration of features like improved search, improved photo editing, and text generation “will drive much broader AI adoption than we have seen to date,” DA analyst Davidson wrote. Gil Luria, who raised his rating to buy. “Apple is uniquely positioned to deliver these capabilities, and may be the only one able to do so in the near term.”
(c) 2024, Bloomberg · Ryan Vlastelica
