Apple is getting its once-in-a-decade secret weapon of the AI-powered ‘smartphone’ – Bank of America sees its shares rise 20%
Apple There’s a new one coming soon secret weapon that could deliver some attractive returns for investors: AI-focused phones. Bank of America Analysts call them “IntelliPhones,” and in a note Wednesday they argued that these high-powered devices will be an entirely new product line compared to the current crop of smartphones. .
Senior equity research analyst Wamsi Mohan and his team described a future where phones will need more computing power to handle the daily use of “AI agents” that will assist helps with everything from travel bookings and real-time translation to scheduling and tutoring. For Apple and its active installed base of more than 2.2 billion smartphones, that means a huge opportunity to sell customers the latest and greatest in AI technology.
“We view the introduction of AI smartphones (IntelliPhones) as a once-in-a-decade upgrade event,” Mohan and his team wrote, forecasting “a future multi-year upgrade cycle.” similar to the gradual improvement in functionality due to the advent of smartphones.”
According to BofA analysts, IntelliPhones are set to bring new experiences to consumers that smartphones will not be able to compete with, including virtual and augmented reality experiences, health monitoring, etc. They write: “As AI technology develops, the gap between IntelliPhones and traditional smartphones will likely widen by offering more sophisticated and personalized functions, fueling the desire to enhance grant”.
Apple’s stock is up just over 7% over the past 12 months, lagging the S&P 500, and in particular, Big tech sector skyrocketed. But with the era of AI-powered phones approaching, Bank of America analysts expect a change. Mohan and his team reiterated their “buy” rating and $230 price target on Apple’s stock on Wednesday. That outlook represents a potential 20% gain for Apple investors over the next 12 months, but that gain would also leave the Cupertino-based tech giant valued 30 times higher. earnings in fiscal year 2025.
However, Mohan and his team say they believe the higher valuation “is justified over a multi-year period.” [iPhone] upgrade cycles, strong cash balances and opportunities to diversify into new end markets, enhancing the mix and diversity of offerings.”
“We see IntelliPhones dominating advanced AI over PC AI, thanks to their portability, features and cost,” he added.
According to Bank of America, one of the keys to IntelliPhones’ success will be AI developers. Mohan and his team said they believe developers will build AI agents that run on Apple’s phones, creating “a new layer of monetization” for the company.
The comments reflect the optimism about AI that CEO Tim Cook described in Apple’s May 2 earnings call. “We believe in the transformative power and promise of AI, and we believe we have the advantages that will differentiate us in this new era, including our unique combination of Apple between seamless hardware, software and services integration, Apple’s groundbreaking silicon with our industry-leading nervous system.” Our drive and unwavering focus on privacy underpins everything we create,” he said.
CFRA Research analyst Angelo Zino also maintained a “buy” rating on Apple’s stock Tuesday, citing improved iPhone sales prospects in China thanks to the company’s AI push . After iPhone sales in China fluctuated in 2022 and 2023 amid rising geopolitical tensions with the US and increased domestic competition, Apple tried turn around in April. iPhone sales jumped 52% from a year ago to 3.5 million units last month, and Zino believes Apple’s AI ambitions will likely drive more growth.
“AAPL’s ambition toward greater AI capabilities ahead of the iPhone 16 launch this fall will appeal to Chinese consumers and also help it better position itself at the high end of the market,” he wrote. .
