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The central theses

  • Apple shares rose to a record high on Tuesday, a day after the iPhone maker announced iOS 18, Apple Intelligence and an artificial intelligence (AI) partnership with OpenAI.
  • JPMorgan analysts said Apple’s AI announcements have increased the likelihood that an iPhone upgrade cycle is imminent.
  • Analysts at Melius Research said older iPhone models could become “obsolete,” triggering a “supercycle” that would support Apple’s growth.

Apple (AAPL) shares rose to a record high in intraday trading on Tuesday, a day after the iPhone maker held its long-awaited keynote at the Worldwide Developers Conference (WWDC), where it unveiled iOS 18, enhanced by Apple Intelligence and an artificial intelligence (AI) partnership with OpenAI.

Shares rose over 5% to $203.78 around 11:30 a.m. ET on Tuesday, adding to a year-to-date gain of over 5%.

Expectation of AI-powered growth through iOS 18, Apple Intelligence and OpenAI partnership

The iPhone maker opened WWDC by announcing its latest operating system, iOS 18, and Apple Intelligence, a personal intelligence system that uses content on each user’s device as context to provide personalized intelligent assistance. Apple also announced a partnership with Microsoft (MSFT)-backed OpenAI to integrate ChatGPT into iOS 18 later this year.

The iOS 18 update will be available as a free software update for iPhone Xs and later devices this fall. Apple Intelligence will be available as part of iOS 18 in beta on iPhone 15 Pro, iPhone 15 Pro Max, and iPad, as well as Macs with M1 chip or later, this fall.

Analysts at JPMorgan said: “Apple’s WWDC keynote showed enough feature set improvements to native and third-party apps with A(pple) I(ntelligence integration) to guarantee us the expected upgrade cycle with the launch of the iPhone 16 and the release of iOS18 this fall.”

How AI could be a game-changer for Apple

The new generation of Apple technology could lead to an accelerated device upgrade cycle as consumers move to devices with built-in AI.

Wedbush analysts wrote that they “believe Apple’s AI strategy will leverage its golden installed base around personalization and LLMs on the phone, which should change Cupertino’s growth curve” and “kickstart an AI-driven iPhone upgrade cycle starting with the iPhone 16.”

“Apple is taking the right path to implement AI across its ecosystem while laying the foundation for the company’s multi-year AI strategy on its strongest installed base of 2.2 billion iOS devices in the years to come,” the analysts said.

“If you want AI, older devices will become obsolete – including all the iPhones purchased during the Covid pandemic,” said analysts at Melius Research, adding that they are “now more convinced of our supercycle thesis, which could even lead to iPhone revenue growth of around 20% for up to two years.”

Analysts expect the AI-driven upgrade cycle to begin gradually in September and continue through fiscal 2025, peaking in the second half of calendar 2026.

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