William Gallagher
Investment bank Morgan Stanley believes that Apple is accelerating its AI work and will announce an improved Siri at WWDC, and launch an AI-powered iPhone in September 2024.
Morgan Stanley has said before that it expects Apple will benefit the most as AI becomes mainstream, but now its analysts are "getting more excited" about what it describes as Apple's Edge AI work.
"[We believe that] 2024 will be the year when Apple's 'Edge AI"' opportunity likely comes to fruition," say the analysts in a note seen by AppleInsider, "highlighted by an LLM-powered Siri 2.0 and a broader Gen AI-enabled operating system (introduced at WWDC in June) that has the potential to catalyze an iPhone upgrade cycle."
This positive prediction comes as other analysts have downgraded Apple, and Morgan Stanley does "acknowledge that our near-term supply chain checks are mixed, which signals Product demand remains uneven into early CY24." However, the firm says "we... are buyers on weakness," and that there are "fundamentals on the path to recovery."
The investment bank is therefore keeping its $220 price target, and says that Apple's Services growth is slightly ahead of its predictions.
Apple has accelerated its hiring of AI experts, says Morgan StanleyMorgan Stanley sees Services as one of the potential beneficiaries of Apple's producing an AI-enabled iPhone. "We believe Apple's Gen-AI software upgrades can also accelerate Services spend per user, which stands at just $8 per month today ( Exhibit 11 ), through new traffic acquisition cost payments, better Services attach, accelerating App Store purchases, and a potential premium Siri subscription."
But it's hardware sales that Morgan Stanley thinks will be most improved by a move to AI.
"Since the 5G iPhone 12 launch in October 2020, we estimate iPhone replacement cycles have elongated by nearly 12 months, to a record 4.5 years ( Exhibit 8 )," it says, "a product of the flattening innovation curve, better device quality, and headwinds to consumer goods spending."
"We believe the introduction of new LLM-enabled software features (incl. Siri 2.0) can reverse this trend," it continues, "as new hardware/component requirements potentially limit the backwards compatibility of a OS upgrade, forcing consumers to upgrade to a new device in a way they haven't had to since the iPhone 12."
However, Morgan Stanley acknowledges that its prediction of an improved Siri being announced at WWDC is at least partly based on the recent rumor that says there has been progress applying generative AI to the voice assistant.
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Charles Martin
Christine McKee
Wesley Hilliard
Malcolm Owen
Andrew Orr
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5 Comments
Whatever it is that Apple comes out with, this is how it'll play out. First, it will not be an Apple-branded version of chatGPT or MS Copilot. It will be fundamentally different. Second, a lot of people won't get that, and there will be lots of underwhelmed ho-hums, even right here on this site or at least in the comments. In a couple of years, it will be doing things none of the underwhelmed commenters ever thought about, and it will be a thing that others are actively trying to replicate. Third, all the past year's brouhaha about AI will be a forgotten footnote, because the generative AI crap others have rushed to market aren't the thing, in no small part because they carry a lot of baggage in the form of misappropriated IP and woefully unreliable accuracy in what it produces. (I mean, using the current crop of generative AI as anything other than a party trick is like being an editor for a sociopathic writer. It's creative with the facts it should source accurately, and copies the actual writing it should be creating itself.)
Subscription AI Siri. I was afraid of that.
It’s apple. They don’t make you use a thousand different apps todo something.