Apple
unveiled
generative
artificial
intelligence
features
for
the
first
time
this
week.
Here’s
what
our
analyst
thought
of
the
announcement.
•
Fair
Value
Estimate:
$170.00
•
Morningstar
Rating:
2
stars
•
Morningstar
Economic
Moat
Rating:
Wide
•
Morningstar
Uncertainty
Rating:
Medium
We
maintain
our
$170
fair
value
estimate
for
shares
of
Apple
(AAPL),
and
view
the
opening
keynote
of
the
company’s
worldwide
developers’
conference
in
a
positive
light.
Apple
unveiled
long-awaited
generative
artificial
intelligence
features,
grouped
under
the
moniker
Apple
Intelligence.
We
continue
to
have
confidence
in
a
strong
iPhone
upgrade
cycle
in
fiscal
2025,
and
we
make
no
changes
to
our
forecast
or
valuation.
Customers
will
need
an
iPhone
15
Pro
model
or
better
to
make
full
use
of
Apple
Intelligence,
which
we
think
should
drive
new
sales
and
upgrades.
The
firm
also
announced
upgrades
across
its
device
operating
systems.
Within
these
upgrades,
we
liked
the
focus
on
customization
and
privacy.
Apple’s
stock
saw
a
tepid
reaction
to
the
keynote,
suggesting
expectations
for
generative
AI
and
the
upgrade
cycle
were
baked
into
share
prices.
We
currently
see
shares
as
moderately
overvalued.
Apple’s
First
Foray
into
Generative
AI
We
were
pleased
with
the
newly
announced
Apple
Intelligence
suite
of
features.
This
is
the
company’s
first
foray
into
the
field
of
generative
AI.
Apple
touted
generative
AI
that
is
personal,
private,
and
integrated,
which
aligns
with
the
firm’s
overall
approach.
Upgrades
to
features
mostly
fit
our
expectations,
with
better
Siri
functionality,
writing
assistance
using
large
language
models,
image
generation,
and
streamlined
notifications
among
the
highlights.
We
were
particularly
impressed
by
Siri’s
ability
to
pull
data
between
apps
and
take
actions
without
redirecting
the
user.
Apple
prioritised
on-device
model
processing,
which
is
more
secure
for
user
data.
It
also
announced
Apple-operated
servers
using
Apple
semiconductors,
which
can
process
larger
generative
AI
queries
without
storing
user
data.
We
believe
this
hybrid
approach
is
practical
and
fits
Apple’s
overall
privacy
strategy.
Finally,
the
firm
is
partnering
with
Open
AI
to
integrate
ChatGPT
into
its
software
for
larger
questions
not
tied
to
a
specific
application.
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