The Apple (NASDAQ:AAPL) announcement of Apple Intelligence at its WorldWide Developer Conference in June was a turning point for the industry.
Shares have jumped 18% since the announcement. Apple is once again the most valuable company in the world, with a market cap of nearly $3.5 trillion.
Of more significance to the industry and the markets, is that Apple Intelligence isn’t AI. Not as the market has defined it since OpenAI’s ChatGPT announcement in November of 2022.
But what’s bad for the AI industry can still be seen as a boon for the House of Cook. Here’s why.
Apple Is the Interface Company
Apple has always been an interface company. This has been true since it was founded almost 50 years ago.
Each interface has been a revolution. There was the Apple II’s typewriter-and-television screen, then the Macintosh’s mouse-and-windows and finally the iPhone’s app-and-touchscreen.
Voice will be Apple’s next interface. Voice unifies Apple’s product line around data users have already accessed or saved on iCloud. Think of it as your private secretary connecting the dots of your life and time.
It will take time to set this up, even for Apple. The next version of iOS 18 won’t include many Apple Intelligence features. Those won’t be available in software until next spring. The new software is a stable upgrade.
That means Apple Intelligence won’t be driving sales of the iPhone 16. There will be improvements, there always are, but expect sales of Apple’s leading device to be flat. Customers will be buying into a TV show before the finale.
This doesn’t mean users can expect nothing from Apple until next year. Apple will bring out Priority Notifications to its iPhone this fall, summarizing your next day’s tasks. If you’ve ever forgotten an appointment and rushed out the door, only to find out the appointment was tomorrow, you’ll love this.
Why Are We Cheering?
The vision of Apple Intelligence is that it will output not just voice but all the pictures, movies, and snippets Generative AI is capable of. However, the language model it will be built on will be your data. The hardware it will run on will be on your desk or in your hand.
Yet analysts are cheering because Apple has sidestepped the problems of ChatGPT and its competitors. Apple has rights to the data because it’s your data. Apple doesn’t need to wear out Nvidia (NASDAQ:NVDA) servers because its models run on your hardware.
The latest rise of Apple, then, is a rejection of its competitors. The promises of Large Language Models (LLMs) are running well ahead of reality. Even Sam Altman, who runs OpenAI, admits that ChatGPT 4 is sub-optimal (He used more colorful language with Fortune).
What’s clear to analysts now is that innovations are needed on the software side, in the algorithms, for AI to achieve its promises. Nvidia hardware has gotten ahead of what AI software can do. The brute force approach isn’t working.
Given that backdrop, Apple represents a safe pair of hands for tech investors. Apple has become a dividend aristocrat. It has paid dividends since 1987 and has gone through five stock splits, most recently in 2020. The dividend is up by 25% just since that split. If you bought some Apple shares as a young tech reporter and just hung onto them, you’re rich, dude.
The Bottom Line on Apple Stock
What analysts most admire is CEO Tim Cook’s cost discipline. Having pushed streaming TV for five years, with little to show for it but industry awards, he’s cutting budgets and seeking a profit from it.
Cook has made Apple the bluest blue chip you can buy, a stock with steady gains and a reasonable bet on the future. Sanity is very sexy, don’t you think?
As of this writing, Dana Blankenhorn had a LONG position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.
