Apple investors look for AI to power next leg of gains

APPLE investors have spent nearly two years clamouring for the iPhone maker to make a big splash with artificial intelligence. Their wait may finally be coming to an end this week at the company’s annual Worldwide Developers Conference.

The event, which begins on Monday at Apple’s headquarters, is expected to showcase a highly-anticipated update to its Siri digital assistant, along with other AI features. That could act as a major catalyst for the stock, which has quietly become the second-best performing Magnificent Seven firm this year despite the market’s increased fixation on all things AI.

It would serve as a moment of redemption for the Cupertino, California based firm, which first previewed its AI features in 2024 but subsequently experienced a number of high-profile delays.

Investors and analysts are looking for reassurance that it’s finally on track to be released and can help drive future sales of its flagship line of phones.

“I’ve become more confident Apple can deliver on AI, but we do need to see it execute for me to feel more comfortable underwriting more durable long-term growth,” said Kyle Levins, information technology analyst at Harding Loevner.

“There’s potential for AI to really accelerate the iPhone upgrade cycle, and if we get a sense that this cycle is going to be bigger, longer, and more durable on account of AI, then I think we can expect to see more upside in the stock.”

Many analysts are optimistic that a strong AI showing at WWDC will support further gains for Apple shares. Morgan Stanley analyst Erik Woodring said a “polished AI platform and clear Agentic vision” could accelerating iPhone upgrades and lifting Services monetisation, driving the stock to as high as US$440, more than 40 per cent above where it closed on Friday.

Woodring called the event a “a pivotal catalyst to reframe Apple as an ‘AI winner,’” adding that for other companies, “being seen an ‘AI Winner’ drives a clear inflection in fundamentals, valuation, and sometimes both.”

Apple shares, for their part, have largely managed to defy gravity for much of the last two years despite the lack of an AI offering, unlike many of its biggest rivals.

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That outlier status has helped buoy the stock during AI-fueled selloffs without alienating it from investors as markets ripped higher. The stock has climbed 13 per cent this year, putting it on track for a fourth consecutive year of gains.

Execution on the AI features, along with “excitement relative to material redesign across the product line-up later in the year” could mean the stock delivers its “typical outperformance through mid-September,” JPMorgan Chase & Co. analyst Samik Chatterjee wrote in a note to clients last week.

Others are more skeptical. UBS analyst David Vogt expects the AI features “will be interesting use cases for consumers but are unlikely to drive material iPhone demand.” 

A disappointment could leave the stock vulnerable given its valuation. Shares trade at nearly 33 times estimated earnings, well above their long-term average, and not far from a 2020 peak of 35.3, which was the highest going back to 2007.

“The one thing that give me pause is the valuation, since growth has been good, but not strong enough to justify trading near a 20-year high multiple,” said Harding Loevner’s Levins.

While Apple is expected to deliver revenue growth of nearly 15 per cent this year, up significantly from the 6.4 per cent pace in fiscal 2025, analysts see that slowing to a 8.6 per cent pace in fiscal 2027 before decelerating further in each of the subsequent two years.

So far, investors have been willing to look past those choppy growth trends and instead focus on the stock’s more defensive characteristics, including its ability to generate strong cash flows and the fact that it hasn’t committed to spending billion of dollars on on AI infrastructure. 

That, coupled with the potential for an influx of sales if Apple’s AI offerings prove they can compete with its tech rivals — something the WWDC event will provide clarity on — creates a strong setup for the stock into year end in the eyes of some analysts.

“I wouldn’t expect the stock to go rocketing up, but I think it would be a safe place to park if there’s a broader tech correction,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services. “At the same time, there’s some upside potential depending on whether they come up with anything that helps with an upgrade cycle.” BLOOMBERG