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Showing up late to a party has its upsides. Just ask Apple.
While Tim Cook's first-mover peers were stumbling through botched AI rollouts, boardroom drama, and a public backlash, he waltzed through the door carrying an Apple Intelligence casserole and Wall Street analysts were ready with a drink.
On Monday the company hit an all-time high as Morgan Stanley named Apple a top pick. It raised its price target on an expected mega upgrade cycle driven by Apple's coming AI platform.
"Apple Intelligence is a clear catalyst to boost iPhone and iPad shipments," Morgan Stanley analysts wrote.
That Apple's yet-to-be-released AI tools will be available to only 8% of existing iPhone and iPad users strengthens the case for an abnormally large upgrade cycle, they said. Add in an already enormous user base and a replacement cycle that has stretched to almost five years, and there's a recipe for a lot of people itching for new devices.
That's a testament to Apple's AI strategy and the clever ways it has presented what AI tools can do for you. By relentlessly highlighting everyday use cases, Apple has managed to wrangle the more hysterical promises of AI into something approachable (and monetizable) inside its ecosystem.
Prior to Apple's AI run-up, Cupertino skeptics pointed to the public's upgrade fatigue, slowing iPhone growth, and the saturated smartphone market in the US. Recent hardware releases also prompted grumblings of a lack of pizzazz, feeding a narrative that Apple's glory days were behind it.
When the company ended its electric car project in February, it seemed Apple was giving up on a daring initiative and giving in to the AI fad. But that inflection point looks different now. With more insight into Cook's AI services-oriented approach, the company's AI strategy looks less like Google and Microsoft's and more like an extension of its walled garden.
Loop Capital likened Apple's AI potential to prior generational shifts in technology.
Twenty years ago, the iPod was the platform through which many consumers experienced digital content. Next 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 striking about Wall Street's outpouring of support, however, is that Apple never really transcended the hardware trap its critics claimed had ensnared it. While AI technology and its use cases may seem revolutionary, the business implications for Apple are all too conventional: People will buy more phones.
That's no world-changing paradigm shift. But it's a reliable way to make money.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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