- Apple's upcoming AI upgrade will trigger a surge of app interest, Wedbush Securities said.
- Its new Apple Intelligence will make the firm the "gatekeeper" of AI customers, the note said.
- Meanwhile, the iPhone 16 upgrade will prompt an upgrade cycle this fall.
Apple will soon hold the keys to the AI consumer, as its upcoming software bridges developers with billions of Apple customers, Wedbush Securities wrote on Monday.
September's iOS 18 will be the first to support generative AI capabilities, triggering a number of revenue streams, analyst Dan Ives said: not only should that prompt a massive buying spree among Apple clients, but it will offer AI developers access to 1.5 billion iPhone users.
Together, these tailwinds could result in $30 to $40 upside per share, he estimated. On the high end, that's a 17% gain from current levels.
Apple's foray into AI was on full display during its Worldwide Developers Conference last month, when the firm revealed Apple Intelligence — a generative AI system that will run on all its devices.
In response, developers as big as Google and Meta will likely redesign their AI software to work with Apple's program, Ives forecast. Through the next 6 to 12 months, consumers will witness the release of hundreds of generative AI apps, he added.
"We believe the Street is now starting to slowly recognize that with Apple Intelligence on the doorstep in essence Cupertino will be the gatekeepers of the consumer AI Revolution," Ives said. For Apple, that translates into Services high margin growth of $10 billion a year.
It's a point similarly made by "Big Short" investor Steve Eisman.
In May, the legendary trader told CNBC that Apple was the "hidden AI play," as new AI apps will push demand for hardware that can run them.
For that reason, Apple's iPhone 16 release this fall should trigger even bigger upside ahead.
Previously, Ives noted that the iPhone's launch will set off a "renaissance of growth," given pent-up demand for a new model. In May, he estimated the upgrade cycle could surpass 270 million units.
Encouraging the outlook is an improving demand in China, and an iPhone growth turnaround will likely begin by September, he said. The "massive" upgrade cycle puts Apple on route to a $4 trillion market capitalization.
"Since WWDC in early June we believe optimism is growing throughout the Asia supply chain that this iPhone 16 AI driven upgrade could represent a golden upgrade cycle for Cupertino looking ahead with pent-up demand building globally," Ives wrote.