The "Magnificent Seven" have been the driving force behind the current bull market. If there's one trend that's been pushing the stock prices of big tech companies higher, it's artificial intelligence (AI).
Practically every member of the Magnificent Seven has a deep connection with the current push to advance AI:
- Nvidia is the leading GPU chip designer, supplying growing data centers designed to train large language models.
- Microsoft, Amazon, and Alphabet (GOOG +2.80%) (GOOGL +3.41%) are leading public cloud providers, providing access to foundational models for developers to create new AI-powered apps. All three have big investments in their own large language models and chip designs as well.
- Meta Platforms is developing a leading large language model, LLaMA, spending billions on data centers to train and implement its AI across its apps.
- Tesla is racing toward a robotaxi service powered by its massive investments in AI.
Just one member of the seven has been exceptionally quiet about its AI: Apple (AAPL +0.72%). The iPhone maker typically doesn't like to talk about what it's working on until it's ready for release. But that could change this summer.
Several analysts believe Apple will make several big AI-related announcements this year. And one analyst expects AI-related products and services will push its stock price to $225, about 33% higher than the price as of this writing.
Image source: Getty Images.
The summer of Apple AI
Bank of America analyst Wamsi Mohan sees the recent pullback in Apple shares as a great buying opportunity ahead of the company's typical event schedule, which is set for this summer.
He sees Apple making a series of AI-related announcements at its annual Worldwide Developer Conference in June. During the company's annual shareholder meeting, CEO Tim Cook promised investors that Apple will "break new ground" on generative AI this year. So the stage is set for Cook to unveil some big products and services.
Nobody knows what Apple could announce. While management has said it's spending a lot of time and money on generative AI, it hasn't provided much in the way of details.
Several reports surfaced last month that Apple was in talks with Google to bring its Gemini AI to iPhones and other devices. Such a deal could be a big win for Alphabet, as its AI efforts have been dwarfed by competitors.
But putting someone else's AI chatbot on the iPhone is hardly "breaking new ground." Investors should expect more.
NASDAQ: AAPL
Key Data Points
That might have to wait until the end of summer, though, when Apple announces new iPhones. Mohan expects the 2024 iPhone model (presumably iPhone 16) will offer on-device generative AI capabilities.
That could be a big breakthrough for AI and data privacy, a major focus for Apple. Being able to run AI apps on a smartphone without sending data to a server for processing could open up the door for many more AI-powered applications and an AI App Store.
Apple is uniquely positioned to offer those capabilities on its hardware since it designs its own chips, some of the most advanced mobile processors available. What's more, they are specially designed to efficiently run Apple's software. That puts it in the driver's seat when it comes to introducing on-device AI to the mass market.
Should you buy Apple before its next big announcement?
The stock has been one of the worst performers among the Magnificent Seven since the start of 2024. Shares are down more than 12%. Only Tesla's stock has performed worse, with every other member producing positive returns above the S&P 500 index.
But the current pullback in price could be a great opportunity for investors. The stock currently trades for just 25.6 times forward earnings estimates. While that multiple is higher than the S&P 500, it's below most of the other members of the Magnificent Seven.
What's more, Apple's strong cash position and massive capital-return program give investors good reason to pay a premium for its shares. Mohan sees the company's capital return program as another potential catalyst for shares.
Even if Apple doesn't provide investors with much to get excited about in AI, the stability of the iPhone and services business make it a great company to own. Adding new artificial intelligence capabilities, especially if they delivere innovation, could send the shares much higher. At its current price Apple stock appears to have more upside than downside.
