Apple may position the next iPhone as an “AI” phone. What would it look like?

In recent years, Apple has had concerns such as:NASDAQ:AAPL) has fallen behind competitors like Nvidia (NVDA) and Microsoft (MSFT) in the generative artificial intelligence space as investors have rewarded it with huge valuation increases.

Despite these Investment firm Bernstein believes tech giants have a lot to tell consumers and investors on this issue.

And it starts with the iPhone.

What is AI phone?

The term “AI phone” is considered a bit “fuzzy” as different people seem to have different definitions of what it actually is. However, Bernstein analyst Toni Sacconaghi said in a note to investors that there is broad consensus that AI capabilities are primarily “incremental” and not revolutionary. Sacconaghi has a market perform rating and a $195 price target on Apple.

Samsung (OTCPK:SSNLF) recently released its Galaxy S24 lineup and integrated several AI linking features, including photo editing features, real-time translation, and photo tagging features.

Sacconaghi predicted that Apple would likely use AI for similar tasks, but could go a little further given its ability to integrate software and hardware.

“We are looking at potential AI capabilities that are broadly consistent with our existing products, including advanced image and video capture/editing tools, translation and transcription, enhanced messaging support, Siri enhancements, and enhanced music automation.” We look forward to seeing you,” Sacconaghi wrote. “We also believe Apple will integrate apps more tightly and seamlessly to improve ease of use.”

Other AI-specific features that Apple could include could be tied to the next Apple silicon, which is expected to be 3-nanometer A18, Sacconaghi suggested.

Is it helpful?

There is a widespread perception among the investment community that Apple is lagging behind the competition in the generative AI space, even as it ramps up spending on technology and reportedly built an internal version of ChatGPT. Masu.

Apple has been overtaken by Microsoft (MSFT) in market cap, and Nvidia (NVDA) has become the poster child for generative AI in the eyes of investors, as its market cap has skyrocketed. 230% Over the past year.

Even if the iPhone’s AI capabilities aren’t unique, the power of the company’s marketing capabilities could be enough to bring about a “material upgrade cycle,” Sacconaghi said.

“We note that Apple has been slower than its peers in introducing large screens (6/6+ cycles), OLED (iPhone X), and 5G, each of which triggered meaningful upgrade cycles for Apple. ” Sacconaghi said.

“Our analysis shows that for every 100 people [basis point] It added that changes in iPhone upgrade rates could mean up to an $8 million increase in phones sold, or up to a $7 billion increase in iPhone revenue. [roughly 300 to 400 basis points] iPhone sales in 2025, and 100-200 [basis points] It will contribute to overall revenue growth,” he added.

Growth could further accelerate if Apple increases the price of the iPhone 16 further (as Google (GOOG) (GOOGL) did with the Pixel 8 compared to the Pixel 7) due to its AI features. he continued.

Bytes from Apple

Apple doesn’t talk much about its future products and services, but it’s worth noting that the company has recently stepped up its comments about generative AI, including during this month’s earnings announcement.

“As we’ve alluded to before, there’s a lot of work going on internally when it comes to generative AI,” CEO Tim Cook said on an earnings call, adding that the company is “incredibly excited.” There are a few things I’m doing,” he added. We’ll talk about that later this year. ”

Cook’s recent comments are “more specific than what he said on our previous call and demonstrate further investment and enthusiasm in AI,” Sacconaghi said.

There have also been a number of media reports in recent weeks that strongly suggest that the next version of iOS will likely be packed with AI-related updates, citing sources familiar with the matter.

If Apple introduces as many AI features as possible into the next iOS, Citi said it will likely do so at its next developer conference, scheduled for June.

The investment firm follows reports that Apple is preparing to expand the capabilities of its Xcode programming software and unveil generative AI tools for iOS developers to better compete with Microsoft’s (MSFT) GitHub Copilot. I emphasized.

Apple has reportedly been working on the tool for the last year, expanding testing of the feature internally and ramping up development ahead of its expected release later this year. The company is also said to be working on introducing AI functionality (automatically creating playlists) to Apple Music, the next version of macOS, and updating the Spotlight search function.