Why Apple’s Strategy for Artificial Intelligence Makes the Stock a No-Brainer Buy
Artificial intelligence (AI) has the potential to be a catalyst for any big tech company, and Apple (NASDAQ: AAPL) is no exception. There have been rumors about what Apple will do with respect to AI and whether it will have its own chatbot. Last week, it unveiled its strategy for AI. And while it wasn’t necessarily a groundbreaking one, it was enough to send shares of Apple soaring to new heights.
Partnering with ChatGPT is a sign it’s taking a safe approach
One thing investors were likely eagerly awaiting was whether Apple was indeed going to come out with its own chatbot. There was speculation about an Apple GPT that could rival ChatGPT, but that remains a rumor at this point.
Instead, Apple is going to make ChatGPT available on Siri, its personal assistant. ChatGPT has 200 million monthly active users and has effectively become the default chatbot for many people. While other tech companies have made their own chatbots, arguably none is as well known as ChatGPT is today. And with Alphabet making multiple blunders with the rollout of Bard and Gemini, not rushing out with its own chatbot could be a good, safe move for Apple.
Focus on privacy will address a major concern related to AI
While AI can definitely help improve the efficiency of day-to-day tasks, one thing that users are growing more concerned about is privacy, including what information chatbots may end up storing and accessing later on. Apple users will be able to take advantage of ChatGPT’s capabilities, but the functionality won’t be automatic. Siri, for example, will only use ChatGPT if the user wants their question to be shared with the chatbot.
Apple says its own Apple Intelligence, which will be available on iOS, is going to focus on “personal intelligence” and it will help prioritize notifications, manage meetings, and help improve someone’s writing. But by and large, the AI will run mainly on the device and users will have greater control over what gets sent to the cloud, to help protect their privacy.
A safe bet for Apple that could help drive an increase in sales
Apple’s new AI capabilities aren’t revolutionary by any stretch. There’s nothing in the company’s most recent update that will likely be a game changer for people who currently use ChatGPT or other chatbots. But by adding AI features to its operating system, that could be sufficient to trigger upgrades and motivate users who have been holding off on buying new iPhones to finally make the leap, in order to take advantage of the latest and greatest technology.
The company has been struggling to grow its top line lately and this could be the catalyst it needs to generate better results. In the first three months of 2024, the company’s top line declined by 4% year over year to $90.8 billion. And product revenue of $66.9 billion was down by nearly 10%. Apple’s services business continues to grow, but with product revenue accounting for roughly three-quarters of Apple’s top line, that’s going to be a key area that investors focus on in future quarters.
Why Apple’s stock should soar higher
Apple has been rising in value since releasing its plans for AI. It’s a good move for the company to move slowly and work on privacy rather than be too aggressive and make mistakes like Alphabet did in rolling out a chatbot too quickly. But whether it does end up creating its own chatbot or not, Apple may not need to; simply giving its users a reason to upgrade their iPhones to the latest iteration is all it may need to do in order to generate some excitement around its products and business again.
Even though Apple’s stock is trading at an all-time high, the company has effectively proven that even a relatively modest move in AI can be enough to lift its share price and likely translate into better revenue growth in future quarters. Making small and steady moves has paid off for investors in the past, and that could end up being the case as well now. With more profit and revenue growth potentially on the horizon, now is an excellent time to buy shares of the tech company.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.
Why Apple’s Strategy for Artificial Intelligence Makes the Stock a No-Brainer Buy was originally published by The Motley Fool
