Growth is accelerating while expenses are as well, says Morgan Stanley's Erik Woodring

Apple's AI Spending and Strategy - Apple's operating expenses are growing faster than usual, indicating increased spending on AI infrastructure and headcount [2][3] - Apple is adopting a hybrid model for AI, building internal technology while also exploring partnerships for large language models [6][8] - Infrastructure spending in operating expenses suggests Apple is training large language models on external cloud services [9] iPhone Performance and Future Prospects - iPhone revenue is accelerating with double-digit growth in the December quarter, the fastest since 2021 [4] - The iPhone accounts for 53% of Apple's total revenue [11] - Anticipation for the iPhone 18, potentially featuring a foldable design, is generating excitement [13] Market and Valuation Considerations - China's market is still challenging, with a 4% year-over-year decline in the September quarter, though early iPhone 17 demand is strong [15] - Services are outperforming, growing 14% annually [12] - Apple's valuation can be justified by the increasing contribution of services to gross profit, currently at 43% [18]