Proactive Investors - Apple (NASDAQ:AAPL) confirmed a partnership with OpenAI to roll out artificial intelligence-powered features in its smartphones, but it did not seem to cut the mustard with investors and analysts.
Tim Cook, CEO of the iPhone maker, announced various ways that AI technology will be incorporated into its tools and systems at his annual Worldwide Developers Conference keynote speech on Monday, which includes integrating ChatGPT and roll out ‘Apple Intelligence’ in devices.
Shares in Apple fell 1.9% on the day and in premarket trading on Tuesday were down another 0.4% to $192.30.
Not helping the reaction, Twitter owner and Tesla (NASDAQ:TSLA) and SpaceX boss Elon Musk threatened to ban Apple devices from his companies if ChatGPT is integrated at the operating system level, as it is “an unacceptable security violation”.
If Apple integrates OpenAI at the OS level, then Apple devices will be banned at my companies. That is an unacceptable security violation.— Elon Musk (@elonmusk) June 10, 2024
“Unimpressive,” was the short review of the investor reaction from Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“None of it surprised or impressed investors,” she said, with the “cherry on top” for financial markets being Musk’s reaction. “The announcement from Apple didn’t go down smoothly the market’s throat yesterday,” said Ozkardeskaya.
Others were much more impressed. Not surprisingly, this included perma-bull analyst Dan Ives at Wedbush. “Apple Intelligence changes the game for Apple,” he said.
“We believe Apple's AI strategy will leverage its golden installed base around personalization and LLMs [large language model generative AI] on the phone that should change the growth trajectory of Cupertino [and] spur an AI-driven iPhone upgrade cycle starting with iPhone 16,” Ives said.
“Apple is taking the right path to implement AI across its ecosystem while laying out the foundation for the company’s multi-year AI strategy across the strongest installed base of 2.2 billion iOS devices over the coming years with the Street giving no credit for AAPL’s AI monetization.
Ives concluded that it was “a historical day for Apple and Cook & Co did not disappoint in our view.”
For other market watchers, the reaction was neutral at best.
“Modest” was the description from Neil Wilson, chief market analyst at Finalto.
He said the announcement “seems to answer worries about whether Apple was keeping up with the Jones in terms of AI”.
Matt Britzman, equity analyst at Hargreaves Lansdown (LON:HRGV), said Apple finally breaking its AI silence with the OpenAI partnership “finally gets things moving while leaving space to develop internal models over the next few years at much lower costs than the first movers”.
He said Apple was caught off guard by the explosion of activity in the AI space, and the partnership gets its “foot in the door”.
“This is a key moment for Apple, which has struggled with innovation of late. Gone are the days when each new iPhone was so jam-packed with new features that consumers felt obligated to upgrade every year, most people probably don’t even know what version they’re using.
“But this is a marathon, not a sprint. It may be late to the party, but the long-awaited AI strategy could trigger a new surge in demand for the latest handsets,” said Britzman.
pic.twitter.com/7OgZAAdPf6— Elon Musk (@elonmusk) June 10, 2024