How AI Can Drive Apple Stock

Core Insights - Apple's stock (NASDAQ:AAPL) has underperformed compared to other Big Tech companies, with only a 1% increase over the last 12 months, while Nvidia, Amazon, and Google saw increases of 40%, 30%, and 20% respectively [2] - Despite strong iPhone sales and a flourishing services sector, concerns about Apple's performance in AI have contributed to its stock underperformance [2][4] AI Development Challenges - Apple's introduction of the Apple Intelligence suite has not met expectations, and the anticipated upgrade to Siri has been postponed indefinitely [3][4] - The perception is growing that Apple is falling behind competitors in the AI space, despite having a large installed base of approximately 2.4 billion devices and strong semiconductor design capabilities [4] Competitive Landscape - Google has made significant investments in AI, with plans to spend around $85 billion on capital expenditures this year, a substantial portion of which is directed toward AI data centers [5] - In contrast, Apple allocated only $3.46 billion on capital expenditures last quarter, focusing on on-device intelligence rather than cloud-based AI [6] Potential Acquisition Strategy - To enhance its AI capabilities, Apple may need to consider significant acquisitions to attract elite AI talent and technology [8] - Candidates for acquisition include Perplexity AI, Mistral AI, and Anthropic, which could help Apple advance its AI offerings and compete more effectively in the market [9] AI as a Growth Catalyst - AI integration could drive a substantial upgrade cycle for Apple, as current AI features are limited to the latest iPhone models, which encompass less than 20% of the installed base [10] - The services segment is already experiencing rapid growth, with revenues nearing $100 billion annually and over 1 billion paid subscriptions, indicating potential for further expansion through AI [10][11] - Leveraging on-device processing could allow Apple to transfer compute costs to users, enhancing hardware sales and service revenues, which may lead to a reevaluation of Apple's stock [11]