Apple is about to get a new one secret weapon This could lead to juicy returns for investors: AI-driven phones. Bank of America Analysts call them “IntelliPhones” and, in a note published Wednesday, claimed that these high-powered devices will be a whole new generation compared to the current smartphone lineup.
Wamsi Mohan, senior equity research analyst, and his team have described a future in which phones will need much more computing power to handle the daily use of “AI agents” that will help with everything from Travel booking and real-time translation to planning and tutoring. For Apple and its installed base of more than 2.2 billion active smartphones, this means a huge opportunity to sell customers the latest and greatest AI technologies.
“We view the introduction of AI smartphones (IntelliPhones) as a once-in-a-decade upgrade event,” Mohan and his team wrote, predicting “a similar multi-year upgrade cycle to the progressive improvement of functions brought about by the introduction of smartphones”.
IntelliPhones are poised to offer consumers a new experience that smartphones won’t be able to compete with, including augmented and virtual reality experiences, health monitoring, and more, according to BofA analysts. “As AI technology evolves, the gap between IntelliiPhone and traditional smartphones is likely to widen further by offering even more sophisticated and personalized features, driving the desire to upgrade,” they said. writing.
Apple shares are up just over 7% over the past 12 months, lagging the S&P 500, and particularly the large booming technology sector. But with the era of AI-enabled phones on the horizon, Bank of America analysts expect a turnaround. Mohan and his team reiterated their “buy” rating and a $230 price target on Apple shares on Wednesday. It’s a prospect that represents a potential gain of 20% for Apple investors over the next 12 months, but the rise would also leave the Cupertino-based tech giant with a lofty valuation of 30 times its earnings as of today. financial year 2025.
Nonetheless, Mohan and his team said they believe a higher valuation “is justified given a multi-year upgrade cycle (of the iPhone), a significant cash balance and the possibility to diversify into new end markets, increasing the mix and diversity of services.”
“We see IntelliPhones dominating edge AI, compared to PC AI, given their portability, features and cost,” he added.
According to Bank of America, one of the keys to the success of IntelliiPhone will be AI developers. Mohan and his team said they believe developers will build AI agents that run on Apple phones, creating “a new layer of monetization” for the company.
These comments echo the AI optimism described by CEO Tim Cook during Apple’s May 2 earnings call. “We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple’s unique combination of seamless integration of hardware, software and services, revolutionary Apple silicon with our cutting-edge neural technology. search engines and our constant focus on privacy, which underpins everything we create,” he said.
CFRA Research analyst Angelo Zino also maintained his “buy” rating on Apple shares on Tuesday, citing improving iPhone sales prospects in China thanks to the company’s efforts in of AI. After iPhone sales in China faltered in 2022 and 2023 due to growing geopolitical tensions with the United States and increased domestic competition, Apple managed to to change things in April. iPhone sales jumped 52% from last year to 3.5 million units last month, and Zino believes Apple’s AI ambitions are likely to reignite growth .
“AAPL’s ambitions for greater AI capabilities ahead of the iPhone 16 launch this fall should appeal to Chinese consumers and also better position it at the high end of the market,” he wrote .
This story was originally featured on Fortune.com
