Apple (NASDAQ: AAPL) shares surged by 12% following the announcement at WWDC on June 10 of its integration of ChatGPT from OpenAI into Siri, a reversal from the declines it sustained for the biggest part of 2024.
This surge propelled AAPL stock to a new all-time high of $216.67 on June 17.
Investors are now digesting the tech giant’s strategic move into generative AI, hoping it will drive future gains for the company.
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Skepticism over Apple’s recent keynote speech
Laura Martin, Senior Media and Internet Analyst at Needham, provided insight into Apple’s announcement’s implications and what the future holds for the Cupertino giant. Despite the positive market reaction, Laura Martin remains unimpressed by Apple’s keynote presentation.
It wasn’t until the last 20 minutes that generative AI was mentioned, which is Wall Street’s primary focus.
“I think Wall Street only cares about generative AI because apps, like their revenue, were down a lot last year, 3%. And this year we’re projecting 1% revenue growth, which is uninteresting as a stock unless they will use generative AI to drive an iPhone replacement cycle, and iPhones are over 50% of their total revenue,” Martin noted.
However, she did not hear any compelling updates that would change revenue estimates or spark significant growth in the near term.
Strategic moves and long-term implications for AAPL stock
Martin highlighted that while competitors like Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT) are heavily investing in large language models for generative AI, Apple is taking a different approach. Instead of increasing capital expenditures, Apple announced a $110 billion share repurchase, signaling their confidence in returning value to shareholders.
This buyback is expected to boost earnings per share by 8%, providing a cushion for the stock. However, Martin warns that in four years, Apple could find itself strategically disadvantaged compared to competitors who are investing heavily in AI now.
Despite this, generative AI is already transforming various industries by reducing costs and enhancing efficiency. The analyst sees it as an essential technology for the future, even if Apple’s current approach seems conservative.
While Apple’s AI platform announcement has temporarily boosted its share prices, there is skepticism about its long-term strategy and ability to capitalize on generative AI.
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