Apple 'poised to win in AI' but that's already priced in says MoffettNathanson

Apple (NASDAQ:AAPL ) is set to be a major player in the AI space, but according to MoffettNathanson, this potential is already reflected in its stock price.

In a recent note to clients, the investment firm initiated coverage of Apple with a Neutral rating and a price target of $211 per share, highlighting that while Apple's AI strategy is strong, the market has already anticipated and priced in these developments.

"Apple is poised to win in AI," MoffettNathanson noted, but cautioned that "that's exactly what's already priced in."

The firm observed that despite earlier concerns about Apple's lag in AI, the market maintained confidence in the company's strategy, particularly following the World Wide Developers Conference (WWDC) where Apple confirmed much of its AI plans.

"By the time of their June WWDC, the broad strokes of Apple's 'contextual awareness' AI strategy were already well-anticipated by the tech intelligentsia, and hence by the market as well," said the firm.

MoffettNathanson emphasized that Apple's AI strategy leverages the trust of its over one billion users, especially regarding personal data like contacts and emails, which remain under Apple's exclusive control.

The firm pointed out that Apple's strategy will likely drive an iPhone upgrade cycle, but the extent of this cycle is already reflected in the stock's current valuation.

"Apple’s new AI functionality would be presented in service of driving an iPhone upgrade cycle – Apple is, after all, still primarily a hardware provider – as capitalizing on resident inference capabilities would require at least 8 GB of RAM and a neural processor that phones older than the iPhone 15 Pro don’t have," they explained.

While Apple is expected to execute its AI strategy well, MoffettNathanson warned of potential risks, including regulatory challenges and the possibility that the upgrade cycle might not exceed expectations.

The note concluded that AI will be the key factor determining Apple's future stock performance, but for now, everything is priced in.

Source: Investing.com