Is Apple Late to the A.I. Party?

Despite launching with much fanfare, Apple’s newest iPhone 16 lineup and its touting of A.I. features, dubbed “Apple Intelligence,” have not quite lived up to expectations, raising concerns that the world’s most valuable company might be truly late to the A.I. game. However, Wall Street analysts are bullish on Apple’s broader prospect, citing the iPhone maker’s dominance in consumer devices.

“They were late [to the A.I. race], but when you have over two billion iOS devices, you can afford to be late,” Dan Ives, a prominent tech analyst at Wedbush Securities, told Observer in an interview. “For Apple, it’s not about being early or late—it’s about being right.” This view echoed what Apple CEO Tim Cook recently told The Wall Street Journal about his A.I. strategy, which can be summarized into four words: not first, but best.

Apple Intelligence promises to deliver A.I.-powered features across iPhones, iPads and Mac computers. Next week (Oct. 28), Apple is set to release a beta version of it to devices installed with iOS 18.1. Customers expect it will revolutionize user experience by offering A.I.-enhanced match and writing assistants, improved Siri, and customizable emojis. Apple will, in Ives’ words, “own the consumer A.I. revolution.”

Ming-Chi Kuo, a renowned Apple analyst at TF International Securities, noticed that demand for the iPhone 16 base models remains “lackluster” compared to last year’s iPhone 15 lineup, he said in an X post on Oct. 9. Based on component demand data, Kuo predicts that iPhone sales during this year’s holiday quarter will decline slightly from last year. However, Ives argues next week’s Apple Intelligence beta release will create an A.I.-driven “supercycle” that could reignite demand in the December quarter. “Many skeptics have missed this—Apple has an unparalleled ecosystem,” he said, noting that there are 1.5 billion iPhones in use globally, of which 300 million are currently due for an upgrade, according to Wedbush data.

Apple shares currently trade at $236, up 27 percent this year so far. “I think the A.I. story alone could be worth $30 to $40 per share,” Ives said, adding that he forecasts “20 percent of the world will access A.I. through an Apple device through the coming years.”

One of the key markets to watch is China, where Apple has struggled over the past year due to increasing competition from domestic brands like Huawei and a general economic slowdown. Yet, Ives forecasts a “renaissance of growth” for Apple in the region and expects up to 15 percent growth over the next year.

JPMorgan analysts echoed this sentiment, recently affirming their overweight rating on Apple, citing “resilience” in demand for the iPhone 16 Pro models and a “strong upgrade cycle” in the U.S.

Pro models have historically been popular among Apple customers, with the iPhone 15 Pro Max and Pro models making up 45 percent of iPhone sales this spring, and the standard iPhone 15 making up just 14 percent. Evercore’s analysts added that Apple is poised to outperform amid “lowered expectations,” maintaining a $250 price target for the stock.

Apple is set to report earnings for the June-September quarter on Oct. 31.