Apple’s AI Ambitions: A Closer Look at the iPhone Upgrade Cycle
Apple, a titan in the tech industry, has always been at the forefront of innovation. However, its recent foray into artificial intelligence with Apple Intelligence has not yet lived up to the initial excitement. Analysts and consumers alike are watching closely to see if the anticipated “super cycle upgrade” for iPhones will materialize. This article delves into the current state of Apple’s AI venture and its impact on the iPhone market.
The Launch of Apple Intelligence
In June of last year, Apple introduced its AI initiative during the Worldwide Developers Conference. By October, Apple Intelligence was available to eligible iPhones, specifically the iPhone 15 Pro models or later. This strategic move was expected to drive a “golden upgrade cycle” among iPhone users, potentially boosting Apple’s sales significantly.
Despite these high expectations, the reality has been somewhat different. The tech giant recently received a rare downgrade to “sell” from Craig Moffett, a senior analyst at MoffettNathanson. According to Bloomberg, this downgrade was partly due to a lack of consumer excitement around AI.
Consumer Response and Market Adjustments
Craig Moffett expressed concerns about the absence of an upgrade cycle, stating, “Not only have we not seen any sign of an upgrade cycle, something that would be concerning enough on its own, but we have seen growing evidence that consumers are unmoved by AI functionality.”
Apple had positioned the iPhone 16, which hit the market in September, as the first iPhone designed from the ground up for AI. William Kerwin, a tech analyst at Morningstar, had previously highlighted AI as Apple’s “biggest story” of 2024. However, the initial hype surrounding Apple Intelligence has led analysts to adjust their expectations.
Kerwin noted, “The initial excitement from the announcement” has shifted to “actually becoming expectations for a tepid growth cycle in the first year, and more aggressive expectations for year two.”
Sales Performance and Future Projections
Ming-Chi Kuo, a well-known analyst in Taiwan for his Apple predictions, reported in a blog post that the iPhone 16 series sold approximately 37 million units during its first preorder weekend. This figure represents a 12.7% decline compared to the iPhone 15’s release weekend.
Despite these numbers, Wall Street remained bullish on Apple stock following the AI announcements at WWDC. However, the full potential of Apple Intelligence is yet to be realized.
Looking Ahead: The Potential for a Super Cycle
Gene Munster, managing partner at Deepwater Asset Management, shared his insights with BI, suggesting that the upgrade super cycle is not entirely off the table. He believes that Apple Intelligence will “play a big role” in a super cycle that could occur in the latter half of fiscal 2025 or in fiscal 2026.
Munster emphasized that Apple still has “a lot of work to do” to achieve a super cycle of iPhone upgrades. The company’s fiscal fourth-quarter 2024 earnings period concluded shortly after the iPhone 16’s release, making it too early to assess the revenue impact of Apple Intelligence. Investors are eagerly awaiting the Q1 2025 data, set to be reported on January 30, for a clearer picture.
Conclusion
Apple’s journey with Apple Intelligence is still unfolding. While the initial excitement has tempered, the potential for a significant impact on the iPhone market remains. As Apple continues to refine its AI capabilities and integrate them into its products, the tech world watches with anticipation. The coming months and years will be crucial in determining whether Apple can indeed spark a “golden upgrade cycle” and capitalize on its AI ambitions.
Originally Written by: Jordan Hart
