Apple shares have benefited since launching its AI strategy by announcing a partnership with OpenAI, the developer of ChatGPT. Now the iPhone maker seems keen to create competition among AI providers for its devices.
Apple has held discussions with Meta Platforms and AI startups Anthropic and Perplexity about the possibility of bringing their technology to its Apple Intelligence platform, the Wall Street Journal reported, citing people familiar with the talks.
Apple shares rose 1.1% to $209.74 on Monday, heading toward the record high of $216. Its market cap has now surpassed Nvidia’s at $3.2 trillion, meaning only Microsoft is larger at $3.3 trillion.
Such deals could help Apple avoid becoming overly reliant on Microsoft-backed OpenAI or Alphabet
‘s
Google when it comes to artificial intelligence.
Google currently pays Apple billions of dollars a year to be the default search engine on the iPhone and in the Safari web browser.
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Apple isn’t proposing a similar model when it comes to artificial intelligence. Instead, it suggested that AI companies would be able to sell premium subscriptions to their services and Apple would keep a portion of the money generated through its devices, according to The Journal. That could help Apple fend off fears that AI will disrupt its lucrative App Store.
“We expect that over the next six to 12 months developers will build hundreds of AI-driven applications that will be key ingredients in Apple’s recipe for success,” Wedbush analyst Daniel Ives wrote in a research note on Sunday.
Ives has an Outperform rating and $275 price target for Apple, the highest across Wall Street.
The real prize for Apple will be a wave of purchases for the upcoming iPhone 16 model, expected this fall, driven by artificial intelligence. Ben Ritzes, an analyst at Melius Research, estimates that about 1.5 billion current iPhones could be candidates for upgrades in the next sales cycle.
“We expect iPhone growth to begin to accelerate meaningfully by the December quarter of this calendar year, driven by the US and improvement in China. In addition to higher unit growth, we believe the iPhone mix will serve as a tailwind as customers opt for larger storage options and higher-end Pro/Max options.” .
Reitzes raised his price target on Apple to $260 from $227 previously, while maintaining a buy rating.
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The new target price is based on a price-to-earnings multiple of 30 times the Reitzes’ forecast for Apple’s earnings in its fiscal 2026.
However, as Apple looks to expand its AI ecosystem, it is facing allegations that its current business is not open enough. The European Union has accused Apple of failing to comply with a new digital competition law, saying its App Store does not allow developers to freely direct customers to alternative ways to make purchases.
The charges were announced on Monday and are the first to be issued under the EU’s Digital Markets Act, which came into force earlier this year. Apple could be fined up to 10% of its global revenue if EU regulators ultimately decide the company violated DMA rules.
Apple did not immediately respond to a request for comment from Baron. Apple said it has made changes in recent months to comply with the DMA, and is confident its plan complies with the law, according to The Journal.
Write to Adam Clark at [email protected]
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