Apple is about to jump into the AI race. Here's what analysts expect it to do

Published Fri, May 3 202412:11 PM EDTUpdated Fri, May 3 202412:59 PM EDT

Although Apple didn't give many specific updates on its artificial intelligence capabilities during its latest earnings announcement, Wall Street's top analysts are bullish that the company's AI strategy will help it make a rebound. Apple posted better-than-expected top and bottom line results in its fiscal second quarter. Despite iPhone and overall sales having fallen on a yearly basis, investors chose to focus more on the company's record stock buyback program — and upcoming optimism toward forthcoming AI updates — powering shares nearly 7% higher on Friday. AAPL 1D mountain Apple shares on Friday More substantive updates on Apple's latest AI offerings in both hardware and services are expected to come during its Worldwide Developers Conference in June. According to JPMorgan's Samik Chatterjee, the focus during the event will primarily be on the AI features Apple will include in its iOS 18 software. "Depending on the materiality of the features as well as the timing of the feature releases, can drive an AI-led upgrade sooner than embedded in our base case assumption," the analyst wrote in a Thursday note. Stock tailwinds from AI anticipation With Apple having been viewed as an AI laggard over the last few months, the updates to come create "incentive for institutional clients to increase positions in anticipation of AI features," said Bank of America analyst Wamsi Mohan. Mohan holds a buy rating on shares and slightly increased his price target to $230 from $225. "We think Apple can deliver AI upside without the AI capex we see elsewhere," Evercore ISI analyst Amit Daryanani wrote in a Thursday note following the earnings. He expects the stock to climb higher with the AI benefits and other positive catalysts. Daryanani has an outperform rating and a $220 price target on shares. Morgan Stanley's Erik Woodring said, "It's hard not to be bullish" after the earnings and revenue beat and the generative AI announcements to come. He is also overweight on the stock and inched up his price target by $6 to $216 after the earnings announcement. "Eyes [now] turn to WWDC (June 10th) as the earnings revision trough now seems to be in the rear-view," Woodring said in a Friday note. "Apple is accelerating investments in Generative AI and [is] set to introduce new features at its most important developer conference ever." The AI announcements could potentially "be enough of a positive catalyst," according to Wells Fargo's Aaron Rakers. He noted that Apple has a differentiated AI strategy compared to other tech giants, where it focuses more on smaller models, partnerships and device optimization. Rakers reiterated his overweight rating and $225 price target on shares. "Management expressed confidence multiple times on the earnings call on how Apple is well positioned to benefit from Gen AI," said Bank of America's Mohan. He added, "We expect Apple to continue investment in its own Silicon (with [high-bandwidth memory] over time) and focus on integrating hardware, software and services to fully monetize the Gen AI opportunity." —CNBC's Michael Bloom contributed to this report.