Demand for Apple Intelligence features will power an iPhone supercycle, according to an analyst – with Apple one of three companies in the race to become a $4T company.
Apple Intelligence will require an iPhone 15 Pro or better, meaning that the majority of current iPhone owners would need to upgrade if they want access to it …
Demand for Apple Intelligence will drive iPhone sales
Many of Apple’s AI features run on-device, and the company has advised that only two current iPhone models are sufficiently powerful to do so – though older iPads and Macs do have the necessary chips.
Apple Intelligence will be available in beta on iPhone 15 Pro, iPhone 15 Pro Max, and iPad and Mac with M1 and later, with Siri and device language set to U.S. English, as part of iOS 18, iPadOS 18, and macOS Sequoia this fall.
That means that even some of those who bought their iPhones less than a year ago will not be able to use the new features, as the standard iPhone 15 and iPhone 15 Plus are not compatible.
Analysts Wedbush believe this will drive many iPhone users to upgrade to this year’s iPhone 16 models, and that this will lead to what’s known as a supercycle – a big peak in iPhone sales.
The holy AI grail we see for Apple is twofold looking ahead: 1) as Apple’s AI strategy is rolled out this will catalyze a long awaited super cycle in Cupertino with 270 million iPhones of the 1.5 billion worldwide in the golden installed base not upgrading their smartphones in more than 4 years based on our estimates, 2) developers will now build hundreds of apps on top of Apple’s AI stack in essence creating a new AI App Store over the coming years that will be the main way that consumers interact with generative AI.
Apple may offer premium Apple Intelligence tiers
All of the Apple Intelligence features so far announced are free on compatible devices, including access to ChatGPT. But Wedbush believes that this may change, with one or more premium tiers offered further down the line.
Taking this a step further, we believe eventually this will lead to a bundled subscription service for Apple around higher end AI capabilities that will be another major catalyst for the Services segment over the coming years as WWDC was music to the ears of Apple developers globally and is just the beginning of this AI Party coming to Cupertino.
Apple, Nvidia, and Microsoft in $4T race
Wedbush says that three of the world’s largest companies – all benefitting from demand for AI – are now in a race to hit a $4T market cap.
We believe over the next year the race to $4 Trillion Market Cap in Tech will be front and center between Nvidia, Apple, and Microsoft. Nvidia’s GPU chips are in essence the new gold or oil in the tech sector as more enterprises and consumers quickly head down this path with the 4th Industrial Revolution well underway.
9to5Mac’s Take
Top comment by KJ705
...but certainly the company is paying for the ChatGPT access and is so far set to absorb that cost.
Absent one of the parties confirming that, I don't think that's a certainty at all. I think it's a pretty good bet that if Apple matches 2023 unit sales of ~230 million phones, that at least half will be able to utilize ApInt. With that many consumers suddenly getting access to a service most probably haven't yet tried, the potential upside for ChatGPT, as the default option to Apple's own off-device model, is huge. I think it's quite possible that Apple is the one being paid, likely on a commission basis for paid OpenAI accounts.
There seems little doubt about the supercycle theory. Excitement about Apple Intelligence is such that it pushed up the company’s share price to a new high, even though AI announcements were long-expected, and previously thought to have been priced-in.
Once the new features launch, alongside the latest iPhones, hype around them is guaranteed to drive purchases of compatible phones. I yesterday outlined the AI features I can’t wait to try.
I was pleased to see that all the features announced will be free. Whether Apple will later choose to sell subscriptions to higher tiers is currently an open question, but certainly the company is paying for the ChatGPT access and is so far set to absorb that cost.
As for a $4T race, only analysts care. Apple has always said that it focuses on products, and believes the financials will follow.
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