Pressure is mounting for Apple to show off the potential of AI at its annual Worldwide Developers Conference (WWDC) on Monday. “Investor expectations are high, but we believe Apple can deliver a positive surprise and unlock latent demand, accelerating the iPhone replacement cycle and sustaining the recent strength of its stock price,” Morgan Stanley’s Eric Woodring wrote in a recent client note. Apple’s shares have underperformed major technology companies so far this year, rising just 1.5%. The company has also come under fire for lacking a direct artificial intelligence strategy, while investors have given credit to companies like Nvidia and Microsoft for demonstrating a clear vision. Apple events are not typically seen as big stock market movers, but that will change this year with the highly anticipated unveiling of new AI-driven generative capabilities, Woodring said. He added that shares tend to underperform the S&P 500 by an average of 10 basis points on the day of the event.Analysts expect Apple to release an upgraded version of its Siri digital assistant integrated into apps like Notes, Messages and Safari, as well as updated iOS 18 operating system software. According to Woodring, AI-powered additions could include new emojis and photo editing. He also expects the Tim Cook-led company could announce a new (or expanded) partnership with OpenAI or Google for the updated operating system. However, analysts say many of these features may only be available for new iPhone models, which could spur demand and drive upgrade cycles. “We view the WWDC presentation as a ‘tick all the boxes’ for Apple to convince investors that AI capabilities will differentiate the iPhone 16 (and future generations) from the iPhone 15 and earlier generations, and will be the same for future Macs and iPads, successfully driving upgrade cycles, although the peak of the accelerating upgrade cycle remains a matter of debate,” JPMorgan’s Samik Chatterjee wrote. The analyst maintained his price target on Apple shares at $225, suggesting a 14% upside from Friday’s closing price. Apple may not unveil groundbreaking features compared to its peers, but it has a “unique advantage” because it controls its own silicon design and services ecosystem, Citigroup analyst Atif Malik said. AAPL YTD “An install base of more than 2 billion means the company has a large user base with a ton of data to optimize the user experience,” he said. Still, not everyone on Wall Street is convinced that Apple’s announcement will be a game changer. Bernstein’s Toni Sacconaghi wrote that while “AI features are likely to be useful and widespread, we believe they’re not necessarily revolutionary compared to what Google (and Samsung) are offering with their AI phones,” but acknowledged that interest in Monday’s event could drive a more significant reaction in the stock.
What to expect from Apple’s AI event and how to trade it
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