While Apple holds its Worldwide Developer Conference (WWDC) every year, the event is attracting a large amount of attention this year in hopes that the company will announce its artificial intelligence (AI) endeavors.

A record number of S&P 500 companies are talking about AI in their earnings call which is reflective of the literal euphoria towards the technology. Apple’s AI efforts have been found wanting and investors have noticed. The iPhone maker is up only about 5% YTD and is underperforming the Nasdaq index.

Nvidia, on the other hand, has raced ahead and is up over 150% in 2024, riding the AI wave. Yesterday, Nvidia surpassed Apple to become the world’s second-largest company as its market cap surpassed $3 trillion.

appl vs nvidia market cap

Apple Lost Its $3 Trillion Market Cap

Apple previously lost its $3 trillion market cap and the crown of the world’s biggest company to Microsoft. While its market cap hit $3 trillion again yesterday, it is now only the third biggest company globally. Apple investors are hoping that this WWDC could help it reclaim its former glory as the world’s largest company.

Expectations from WWDC this year are elevated as Apple has teased AI-related announcements at the event. During the company’s fiscal Q2 earnings call, Apple CEO Tim Cook said, “We continue to feel very bullish about our opportunity in generative AI. We are making significant investments, and we’re looking forward to sharing some very exciting things with our customers soon,” which was likely a reference to WWDC.

https://Twitter.com/MarioNawfal/status/1798334781953909226

What Are Markets Expecting from WWDC?

According to a report by Mac Rumors, Apple might make some key announcements at the event. It cited, Bloomberg’s Apple afficianado Mark Gurman, who believes the iOS 18 will have a “relatively groundbreaking” software update with “major new features and designs,” that would predominantly be focused on AI.

According to the publication, Apple is rumored to integrate AI into iOS with the following features:

  • AI-assisted slide deck creation in Keynote
  • Transcriptions for voice memos
  • Generative AI functions in Safari web search
  • Functionality to retouch photos with AI including a cleanup feature to remove objects
  • AI-assisted writing in Pages and slide deck creation in Keynote
  • Suggestions on replies to emails and messages
  • Support for AI-generated custom emojis
  • A smart recap of missed notifications
  • AI-generated Apple Music playlists

Notably, Apple’s competitors have already come up with some of these features. Spotify for instance introduced an AI playlist builder in April. The feature will help users curate a personalized playlist based on the artists, tracks, and genres that AI would recommend.

Bloomberg recently reported that Apple is partnering with OpenAI to bring ChatGPT to its operating system and the fruits of this partnership could be announced at the WWDC. It could be a massive win-win deal as it empower millions of iPhone users with advanced AI while ChatGPT would secure a gargantuan user base.

Why are AI Product Enhancements Key for Apple?

Apple has been battling several challenges and the company’s sales growth has been sluggish for the last many quarters. Its revenues fell YoY in all four quarters in the last fiscal year amid the slowdown in iPhone sales. In particular, it is facing tough competition in China where Huawei’s smartphones have been a hit among consumers.

Apple’s Services business is also facing regulatory heat over the alleged monopolies in the App Store. While Apple and Alphabet maintain that they are not creating monopolies, users have few options to bypass the hefty fees that they charge on in-app purchases,

Amid rising competition, Apple has to step up its game and needs to make its devices AI-enabled to maintain its status as a premium smartphone company. Otherwise, the company risks falling behind other tech companies that have started to capitalize on AI.

How do Analysts see AAPL Stock Ahead of WWDC?

2024 hasn’t been a good year for Apple, and the stock is among the worst-performing Big Tech companies with the notable exception of Tesla. The iPhone maker faced downgrades from three analysts in January which was quite rare for the company.

However, of late brokerages are turning bullish on Apple as it pivots to AI. JPMorgan analyst Samik Chatterjee is among those who believe AI products would help Apple spur hardware sales.

“The increasing appetite from investors has largely been driven by interest in participating in the cyclical upsides associated with the AI on-device led upgrade cycle, with investors taking the cue from the 5G-led upgrade cycle,” said Chatterjee in his note in April.

Dan Ives of Wedbush Securities also recently raised Apple’s target price to $275 as he predicts an iPhone supercycle.

Bank of America analyst Wamsi Mohan listed Apple as a top pick while maintaining a $230 target price. He said, “We view the upcoming AI enabled phones (IntelliPhones) to drive a multi-year upgrade cycle similar to the step function improvement driven by the introduction of smartphones.”

Mohan added, “With an installed base of over 4bn smartphones, we see the opportunity for the next upgrade cycle to be once in a decade type of event.”

https://Twitter.com/Machine4lpha/status/1765378953668137182

Can AAPL Reclaim Its Lost Glory?

While other Big Tech companies have seen a rerating amid the AI pivot, Apple’s efforts have lagged so far. Notably, tech companies have talked about their AI endeavors at length during their earnings calls over the last year, but the topic barely featured in Apple’s earnings calls.

The iPhone maker did a course correction and its Cook finally used the “golden words” during the fiscal Q1 earnings call earlier this year while teasing more announcements later in the year.

As Apple prepares for the WWDC, markets will closely watch the announcements this time around, especially on how the company plans to incorporate AI features in its devices. To reclaim its lost glory and the status as the world’s biggest company Apple needs to convince markets that it is pretty much in the AI race and not slacking in its efforts to offer AI features in its gadgets.