It’s been nearly two weeks since Tim Cook and Apple (NASDAQ:AAPL) launched Apple Intelligence, its personal intelligence system for the company’s various products. Late to the AI game, Apple stock has moved higher on the news.
“Our unique approach combines generative AI with a user’s personal context to deliver truly helpful intelligence. And it can access that information in a completely private and secure way to help users do the things that matter most to them,” Cook stated in its June 10 press release.
“This is AI as only Apple can deliver it, and we can’t wait for users to experience what it can do.”
Full disclosure: I own many Apple’s products. Given I also use a PC for work, I know there’s a big gap between what the Mag 7 companies say generative AI can do for me, and what it delivers. It’s still pretty wide.
So, I’m skeptical that Apple has cracked the AI code, like no one else could. That said, I have faith in Tim Cook’s ability to see what matters to the Apple ecosystem and what’s nothing but fluff.
Apple stock remains a long-term buy. Here’s why.
Apple Stock is Coming Back Into Favor
Thanks to Tesla’s (NASDAQ:TSLA) awful performance in 2024, Apple doesn’t have the worst performance year to date. Apple stock is up 13% compared to a 27% decline for Tesla. The other five are killing it, especially Nvidia (NASDAQ:NVDA), up 175%.
Colin Cieszynski, SIA Wealth Management’s chief market strategist, appeared on BNN Bloomberg’s Market Call segment on June 20, discussing his three favorite stocks to buy. Apple was one of them.
Cieszynski believes that the company’s stock is currently benefiting from institutional investors reallocating assets from within the Magnificent Seven. My bet is to take profits on Nvidia while still gaining some upside from the seven stocks.
Until the Mag 7 is all played out, I could see this happening more often in the next 12-18 months. Therefore, it can’t hurt to buy AAPL when it’s down, because it’s never generally out for very long.
Over the past month, Apple has had the third best performance of the Mag 7, up 10.1%, following behind only Meta Platforms (NASDAQ:META), up 33.1%, and Nvidia (NASDAQ:NVDA), up 39.5%.
It’s Early Innings in AI
If AI was a nine-inning baseball game, we’d be in the top of the second with nobody out. It’s that early in the technology’s development. If Apple’s truly late to the party, it wasn’t a great party to begin with. There’s no way this technology isn’t a game changer. Apple will find its legs.
But to be a global player, it has to figure out what to do about China.
“China is in another world when it comes to AI given the regulatory environment there, so China is a big asterisk on Apple’s big announcements last week,” Bryan Ma, vice president of devices research at IDC, told CNBC via email.
CNBC points out that because its large language models for Apple Intelligence are their own, they would have to be approved by the Chinese government.
Further, even though it’s got a partnership with OpenAI, that’s worthless in China because ChatGPT is not allowed in China. It would have to find a domestic partner in China to work with instead of OpenAI.
CCS Insight Chief Analyst Ben Wood told CNBC that Apple would have to customize its localized AI experience to account for the differences with the two countries.
“Localising the Apple Intelligence experience will be a major challenge for Apple,” Wood told CNBC. “As with all technology deployments, there are nuances to the way the service is delivered to respect the specific customs, regulations and use cases in a particular country.”
The good news is Apple’s privacy is always taken seriously. That should help Chinese regulators warm up to Apple Intelligence. I’m sure they’ll figure it out.
Here Come the Upgrades
When was the last time the company hit a homerun on its quarterly iPhone sales? It’s been a while.
Its global iPhone shipments in Q4 2020 were 90.1 million. They dropped to 84.1 million in Q4 2021 and 72.3 million in Q4 2022. They rebounded to 80.5 million in Q4 2023. However, they’re likely to report a fall again in Q4 2024.
Fortune recently reported that Apple Intelligence is helping iPhones owners to upgrade.
“Apple’s biggest problem with the iPhone hasn’t been quality — new models regularly get excellent ratings and reviews — but rather giving customers new reasons to upgrade every year. One could argue the last major update came with the iPhone 12 in late 2020, which was the first to support the ultrafast 5G network,” wrote Fortune’s Dave Smith.
To use Apple Intelligence, you will need at least an Apple 15 iPhone model. I just got one to replace my old iPhone that was at least four or five years old. I’m excited to see how Apple Intelligence stands up to the competition.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
