AI to drive over 1.2 billion Apple iPhone, iPad and Mac upgrades: Morgan Stanley
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US broker names Apple its top stock pick, driving its shares to another record high.
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NEW YORK - Apple shares surged to another record high on July 15 after the tech giant was named a top pick at Morgan Stanley, with the broker seeing the launch of the company’s artificial intelligence platform triggering a record rush among users to upgrade their smartphones, tablets and computers.
Analyst Erik Woodring boosted his price target on the tech giant’s shares to US$273, the third-highest among analysts tracked by Bloomberg, saying Apple Intelligence has potential to drive a record number of device upgrades.
The feature is a “clear catalyst” for a multi-year upgrade cycle, he wrote in a note.
The highest price target for Apple shares comes from Loop Capital, which on July 16 raised the stock to buy from hold and boosted its objective to US$300 from US$170.
Apple is in a position to become the generative AI “base camp” of choice for consumers, “just as it has done for digital content (iPod) and social media (iPhone)”, analyst Ananda Baruah wrote in a note.
Morgan Stanley’s Mr Woodring forecasts Apple will ship almost 500 million iPhones over the next two years – higher than the record cycle in 2021-2022.
Apple unveiled its suite of AI services
Shares in Apple rose 1.7 per cent to close at US$234.40 on July 15 Through its July 12 close, the shares had risen 17 per cent since the company unveiled Apple Intelligence, outpacing the Nasdaq 100 Index’s 7 per cent gain over the same period.
“We believe that there is a record level of pent-up demand entering the iPhone 16 cycle later this year,” wrote Mr Woodring, who has an overweight rating on the stock. “Coming out of the Worldwide Developers Conference – where Apple debuted Apple Intelligence – we have even greater conviction that financial year 2025 could be the start of a multi-year device refresh cycle.”
Apple Intelligence will “deliver much improved, and unique to the Apple ecosystem utility value” for more than 1.3 billion users, Mr Woodring said, adding that it will force device upgrades and accelerate product replacement cycles – a key catalyst that has historically driven Apple stock outperformance.
Only 15 per cent Apple’s total installed user base will be able to support Apple Intelligence because the technology will be limited to devices using A17 Pro and M-Series chips, Mr Woodring said.
While a majority of Mac users will be able to use it, just 8 per cent of current iPhone and iPad users will be able to power the AI platform.
Under the analyst’s estimates, more than 1.2 billion iPhones, iPads and Macs will need to be upgraded.
Initial adoption of Apple Intelligence will be limited to US English iPhone users when it launches this autumn.
Still, Mr Woodring sees factors such as the broadening of non-English functionality adding even more value to users over the next 12 to 24 months.
In Mr Woodring’s view, it sets Apple up for a return to year-over-year unit growth in financial year 2025, followed by a potential for a major cycle in financial year 2026.
Apple’s annual sales in India hit a record of nearly US$8 billion (S$10.75 billion), Bloomberg News reported on July 15, underscoring a rapidly growing market where the iPhone maker now assembles more of its devices and operates two flagship stores. BLOOMBERG
