Apple’s $471 Billion Rally Depends on AI Event Success

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Apple’s (NASDAQ:AAPL) stock rally, adding $471 billion in value, hinges on the success of its AI-focused annual Worldwide Developers Conference (WWDC) starting Monday. Investors are optimistic that new AI features will drive consumer demand for the next generation of iPhones, addressing concerns that Apple has limited growth catalysts.

Wedbush has labeled the WWDC as “the most important event for Apple in over a decade.” High expectations could lead to disappointment if the event underdelivers, especially as Apple’s stock trades at a high multiple. Shares remained relatively unchanged on Monday.

“If Apple doesn’t come out with compelling reasons to upgrade, that’s a real problem,” said Greg Martin, co-founder of Rainmaker Securities. “If the event is uninspiring, I think the stock will be stagnant for a while.” Conversely, a successful event could serve as a significant catalyst.

The stock has surged nearly 20% since an April low, reclaiming a market valuation above $3 trillion and nearing a record close from last year. This rally has been supported by a strong earnings report in early May, where Apple announced the largest buyback in U.S. history, and growing optimism about AI.

Despite recent gains, Apple’s year-to-date rise of 2.3% lags behind the Nasdaq 100 Index’s 13% increase. Competitors with more evident AI integration, such as Microsoft, Amazon, Alphabet, and Meta Platforms, have achieved double-digit gains. Nvidia, an AI-focused chipmaker, has soared 144%, briefly surpassing Apple in market size.

Apple’s slower growth compared to its megacap peers is evident. Revenue fell 4.3% in Apple’s fiscal second quarter, marking the fifth decline in the past six quarters. Despite this, Apple trades at 28 times estimated earnings, significantly higher than its 10-year average of 19. This valuation and growth disparity mean fewer than two-thirds of analysts tracked by Bloomberg recommend buying the stock, a low ratio among megacaps.

The WWDC comes at a critical juncture. Investors are banking on new AI features to spark an iPhone upgrade cycle, boosting growth in Apple’s flagship product line and supporting its high-margin services business. Bloomberg News reported that Apple will announce a deal with OpenAI to integrate AI models into the iPhone’s operating system, enhancing native apps like Siri, Photos, Music, and iMessage with AI capabilities.

However, the impact remains uncertain. Bernstein’s Stacy Rasgon notes that while AI functionality on the iPhone will be useful and pervasive, it may not be revolutionary compared to what Google and Samsung offer in their AI phones.

Analysts expect limited short-term impact. Consensus for Apple’s full-year net earnings has hardly changed over the past quarter, while revenue projections have dipped 0.5%. Estimates for 2025 revenue have also decreased over the past three months.

“The event looks at least somewhat built into the stock, and Apple therefore needs to really come up with something new for the momentum to continue,” said Rick Bensignor, CEO of Bensignor Investment Strategies and a former Morgan Stanley strategist.


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