Dan Ives predicts Apple ‘supercycle’ with new AI-optimized iPhone. What could this mean for the stock?

When longtime tech analyst Dan Ives of Wedbush talks, investors tend to listen. He is one of the most prominent voices in stock market expertise and several of his calls have proven to be correct.

So the market noticed when Ives grew bullish on the next phase of the Applehis (AAPL -2.78%) development, which he believes will be an upgrade “supercycle” starting with the newly introduced iPhone 16. The analyst believes that masses of people currently using older iPhone models will be eager to upgrade to 16, especially because of a feature that should produce an increase in demand.

An even smarter smartphone

That feature is Apple Intelligence, which, as the name suggests, is the tech giant’s artificial intelligence (AI) platform. Apple Intelligence is set to be packed into all iPhones starting with the 16. So far it’s been a rare bird with limited access to the high-end iPhone 15 Pro series.

Ives wrote in a research note about the company that users of older iPhones won’t be able to resist the lure of AI. Rapid sales of AI-filled iPhone 16 should result, and as a result, developers will create hundreds of AI-based apps for Apple’s iOS. This will make the company a major engine, or THE important driver of AI development in the vast consumer sphere. In turn, this should significantly boost Apple’s fundamentals and increase demand for its stock.

“We think (Wall) Street is slowly starting to recognize that with Apple Intelligence on the doorstep, Cupertino will essentially be the gatekeepers of the consumer AI revolution,” the analyst wrote in late August, just before the iPhone 16 was introduced.

According to Ives’ research, about 300 million iPhone users haven’t updated their hardware in more than four years (in total, there are 1.5 billion iPhones in this world, according to his estimates, making up the most of Apple’s 2.2 billion total devices). Assuming his prediction comes true, the company could indeed see a sudden, skyrocketing demand from those who want the 16. He put a dollar figure on that, predicting that Apple will earn between $30 and $40 per share from AI monetization opportunities only.

Test your enthusiasm

Like a lot of tech companies, incumbents and upstarts alike, Apple is pushing to be the first mover in mass-market AI. For all its size, range and power, however, pole position is by no means guaranteed. To cite just one example, Apple’s peer/rival Microsoft developed and implemented Copilot, a suite of AI tools that is integrated into a wide range of the company’s software and services.

Like the iPhone 16 with Apple Intelligence, Microsoft is also baking a version of Copilot into the hardware. In May, it introduced a new series of Windows PCs that will have Copilot+ pre-installed. The AI ​​revolution may end up being led not by iPhones and iPads, but by desktop gamers using Windows PCs — which are so common in homes and workplaces that they’re almost ubiquitous.

So while Ives’ excitement is understandable given Apple’s big AI launch, at this point no one should be ready to award the company the gold medal. Generative AI takes some time to understand and master, so I don’t imagine it’s a sudden killer app. I also don’t get the impression that most consumers are frothing at the mouth to have an AI phone. The technology is still relatively new, and even though many are aware of its potential, they may not find it useful and applicable enough in their lives (at least, not yet).

That said, AI will definitely be a draw for a segment of the iPhone user base and to some extent help attract new users. I think this demand is more likely to manifest as an initial slow burn before progressing into long-term growth; ditto for AI’s impact on Apple’s results and the popularity of its stock. So, as a current Apple shareholder, I’m encouraged by what AI could do for its future. I’m just not ready to get too excited about it at this early stage.