What is the most desirable aspect consumers are looking for in their AI smartphones? Strong privacy features – by far, apparently.
That is the conclusion reached by Rosenblatt analyst Barton Crockett, following a survey taken by the firm, which had consumers rank 15 features from least to most wanted. The fact privacy was the clear winner – positive 17.8%, 5.6 percentage points higher than the next ranked feature, Insight – is a boon for Apple (NASDAQ:AAPL), considering the “unique privacy focus of Apple Intelligence, to date unmatched by Android.”
Apple is positioned to outpace its peers in another significant way. Its strategy involves focusing on specialized large language models (LLMs) and utilizing its proprietary Apple silicon. This approach helps Apple avoid the cost pressures that are contributing to an estimated $40 billion increase in capital expenditure (CapEx) for hyperscalers like Alphabet, Amazon, Meta, and Microsoft this year compared to 2023. In contrast, Apple anticipates maintaining steady CapEx, reflecting a “non-disruptive investment” strategy.
“So Apple can have its cake (healthy margins) and eat it too,” explained Crockett, “by using integration via Private Cloud Compute with third parties to offer the benefits of these companies’ massive investments.” On the third-party front, Apple has begun the integration process with OpenAI but is also reportedly in discussions with Alphabet and Anthropic.
Based on survey work done earlier in the year, in the US alone, Crockett reckons there’s an $11 billion “market opportunity” for AI subscription services like Microsoft Co-Pilot and subscription ChatGPT. “For a portion of that,” he summed up, “Apple could extract an app-store-like fee.”
Seeing this as a “tipping AI risk/reward” point favoring the tech giant, Crockett has upgraded his AAPL rating from Neutral to Buy and raised his price target from $196 to $260, suggesting shares now have room for 12-month growth of ~23%. (To watch Crockett’s track record, click here)
Most on the Street agree with Crockett but not conclusively so. Based on a mix of 24 Buy recommendations, 10 Holds and 1 Sell, AAPL stock claims a Moderate Buy consensus rating. The average price target stands at $219.96, implying a modest 4.5% upside from current levels. (See Apple stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
