Bernstein is restarting its coverage of Apple and has given its shares a price target of $290, as it sees a favorable future for Apple Intelligence and Apple's on-device AI processing efforts.
It's safe to say that Apple is behind the rest of the market when it comes to artificial intelligence and machine learning. However, the iPhone maker is working to catch up, and if one analyst is to be believed, its approach could be extremely profitable.
In a note to investors from Bernstein seen by MarketWatch, analyst Mark Newman has initiated coverage of Apple stock with an outperform rating and a price target of $290.
According to Newman, he sees "significant upside in the long term" for Apple's hardware. For Apple, it's all about its on-device capabilities.
Rather than relying on cloud computing, Apple has instead worked to create models that work directly on the iPhone, iPad, or Mac. While servers could be accessed to perform queries, Apple instead is trying to get as much processing done on the device itself, using the onboard Neural Engine.
The approach plays into Apple's strengths in ensuring the security and privacy of user data, Newman writes. It may also be a quicker form of data processing, since it doesn't rely on a data connection and capacity on a server.
While Apple already does employ on-device processing for some queries, Newman is confident that models will quickly improve so that agentic tasks could be performed locally.
Slow, but that's OK
Apple's position in the AI marketplace lags behind many major firms, including other big tech rivals. So far, it has introduced features of Apple Intelligence, such as Writing Tools and Image Playgrounds, but it has not stepped into the Chatbot arena yet.
The nearest it has to that would be its long-delayed promise of a new Siri. One that, eventually, should be able to understand contextual clues within data, such as identifying family members as part of a wider query.
The delay and the lack of a definitive "killer app" have led to some investor grumbles, as well as some negative takes from analysts . But Newman leans otherwise, believing Apple is a company that can afford to take its time on its AI projects.
Part of this is due to the potential for Apple to reinvent itself via new form factors. Items such as Apple Glass or smart rings could be entryways to expanded AI usage.
To Newman, it is crucial to Apple's success that it can package AI into a form that is easily accessible to consumers. A bad implementation could be costly for Apple in the future.
For the moment, Apple isn't at risk of consumers jumping ship to the more AI-centric Android competitors. Apple still has time to acquire or copy capabilities from elsewhere before its position comes under threat.
