Apple is about to get a brand new secret weapon that would bring investors juicy profits: AI-based phones. Bank of America analysts call them “IntelliPhones” and argued in a note Wednesday that these powerful devices will represent a wholly recent generation in comparison with the present crop of smartphones.
Senior equity analyst Wamsi Mohan and his team described a future wherein phones will need much more processing power to handle the every day use of “AI agents” that can help with the whole lot from travel booking and real-time translation to scheduling and tutoring. For Apple and its installed base of over 2.2 billion lively smartphones, this represents an enormous opportunity to sell customers on the most recent and best AI technology.
“We consider the introduction of AI smartphones (IntelliPhones) as a once-in-a-decade upgrade event,” Mohan and his team wrote, predicting “a multi-year upgrade cycle similar to the incremental improvement brought about by the introduction of smartphones.”
IntelliPhones will offer consumers a brand new experience that smartphones cannot compete with, including augmented and virtual reality experiences, health monitoring and more, in keeping with BofA analysts. “As AI technology continues to evolve, the gap between IntelliPhones and traditional smartphones is likely to widen even further as they offer even more sophisticated and personalized features, driving the desire to upgrade,” they wrote.
Apple shares have risen just over 7% over the past 12 months, underperforming the S&P 500 and the emerging Big Tech sector particularly. But with the era of AI-enabled phones on the horizon, analysts at Bank of America expect a turnaround. Mohan and his team reiterated their buy rating and a $230 price goal on Apple shares on Wednesday. That’s a forecast which means a possible 20% gain for Apple investors over the subsequent 12 months, but that surge would also give the Cupertino-based tech giant a lofty valuation of 30 times its fiscal 2025 earnings.
Nevertheless, Mohan and his team said they imagine the next valuation is “justified given a multi-year [iPhone] Upgrade cycle, large cash balance and opportunity to diversify into new end markets, increasing mix and diversity of services.”
“We expect IntelliPhones to dominate edge AI due to their portability, features and cost compared to AI PCs,” he added.
One of the keys to IntelliPhones’ success will probably be AI developers, in keeping with Bank of America. Mohan and his team said they imagine developers will create AI agents that run on Apple phones, creating “a new level of monetization” for the corporate.
The comments reflect the AI optimism that CEO Tim Cook described in Apple’s earnings call on May 2. “We believe in the transformative power and promise of AI, and we believe we have advantages that will set us apart in this new era, including Apple’s unique combination of seamless integration of hardware, software and services, groundbreaking Apple silicon with our industry-leading neural engines, and our unwavering focus on privacy that underlies everything we create,” he said.
CFRA Research analyst Angelo Zino also maintained his buy rating on Apple shares on Tuesday, citing improved iPhone sales prospects in China resulting from the corporate’s AI offensive. After iPhone sales in China stalled in 2022 and 2023 resulting from rising geopolitical tensions with the U.S. and increased domestic competition, Apple turned things around in April. iPhone sales rose 52% year-on-year to three.5 million units last month, and Zino believes Apple’s AI ambitions are prone to fuel further growth.
“AAPL’s ambitions for greater AI capabilities ahead of the iPhone 16 launch this fall are likely to appeal to Chinese consumers and also better position the company at the high end of the market,” he wrote.
