In CNBC’s article “Apple is set to win AI race, but it’s already priced into the stock, says analyst Craig Moffett,” Samantha Subin quotes Craig Moffett saying, “We fully expect that Apple’s well-crafted AI strategy will drive a substantial upgrade cycle, We further expect that AI will eventually underpin a paid-for digital assistant, giving yet another boost to their ultra-high-margin Services business. But all of that, and then some, is already in Apple’s stock price.” Moffett Nathanson’s recent analysis suggests that Apple’s stock price might already reflect most of the expected benefits from its artificial intelligence (AI) strategy. Analyst Craig Moffett began covering Apple with a neutral rating and set a price target of $211, implying a slight drop from its recent close. Moffett acknowledges that Apple’s AI strategy, dubbed “Apple Intelligence,” could drive a significant upgrade cycle, especially for its iPhone lineup, and boost its high-margin Services segment with products like a paid digital assistant. However, he argues that these expectations are already mostly built into Apple’s current valuation, limiting its potential for further gains.
Moffett compares the upcoming AI-driven upgrade cycle to the “perfect storm” 5G upgrade cycle of 2021 and 2022. Back then, Apple’s valuation benefited from a lower price-to-earnings ratio and more favorable interest rates—factors that are no longer present. As a result, Apple would need to achieve much higher growth to justify its current valuation. Moffett suggests that the market has already priced in a strong iPhone upgrade cycle, possibly even bigger than the one seen during the 5G transition, which could limit the potential for substantial gains in Apple’s stock from its AI initiatives.
Moffett also points out external challenges that could hinder the success of Apple’s AI rollout, including regulatory and geopolitical issues, as well as the potential fallout from the ongoing antitrust lawsuit against Google, which could affect Apple’s profitable search engine partnership. Despite these concerns, Apple’s shares have risen more than 16% this year, continuing to outperform most of its major tech peers. Moffett clarifies that his analysis doesn’t imply that Apple is overvalued but rather that the market has already accounted for the expected AI-driven upgrade cycle, leaving little room for additional upside surprises.
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