Semiconductor shares have been among the many greatest beneficiaries of the generative AI surge, as tech firms have targeted on securing as a lot computing ammunition to coach and deploy their AI fashions. For perspective, GPU main Nvidia inventory (NASDAQ: NVDA) has gained about 170% since early 2024, whereas Broadcom inventory (NASDAQ: AVGO), which sells customized AI chips, is up 110%. That being mentioned, there are considerations that demand may cool off, with the arrival of extra environment friendly AI fashions akin to China’s DeepSeek and in addition because the frantic “fear-of-missing-out” part of AI silicon demand finally eases. See How DeepSeek’s AI Model Impacts Nvidia Stock. We imagine Apple inventory (NASDAQ: AAPL) could possibly be a giant winner within the subsequent part of AI evolution. Apple started its AI push with the rollout of Apple Intelligence instruments for its iPhones, iPads, and Macs late final yr. The corporate is in a powerful place to learn, given its massive put in base of units, sturdy semiconductor design capabilities, and skill to ship extra personalised and safe AI whereas spending much less on expensive server-side compute necessities.
AI Drives Improve Cycles
Though Apple was a bit late to the celebration, with its new Apple Intelligence providing – which incorporates upgrades to its Siri voice assistant, new writing help instruments, calculator options, and picture technology – the corporate’s implementation of AI is fairly spectacular. That is in distinction with many different massive tech gamers who’ve been but to discover a stable use case or enterprise mannequin to deploy their generative AI choices. Though primarily a software program replace, on the iPhone aspect, Apple Intelligence is unique to iPhone 16 and 16 Professional fashions, with the one exception being final yr’s iPhone 15 Professional units. This restricted backward compatibility creates an incentive for customers of older iPhones to improve. Now whereas the software program debuted late final yr, iPhone gross sales have remained considerably tepid. Within the vacation quarter, iPhone income truly declined 1% year-over-year to $69.2 billion. We imagine that some components may drive an eventual uptick in gross sales. Apple has adopted a staggered strategy, rolling out a small set of options with every software program replace. Many shoppers could also be holding off on upgrading till all AI options are absolutely out there. There could also be numerous scope for upgrades as we estimate that Apple Intelligence is prone to be appropriate with properly beneath 20% of Apple’s complete iPhone put in base in the intervening time. As AI capabilities broaden throughout extra units, this could assist to spice up Apple’s sluggish iPhone and iPad companies, which have seen little progress lately.
Companies Progress
Apple’s providers enterprise clocked near $100 billion in revenues over the past 12 months. Companies gross sales grew by about 14% over Q1 FY 2025 to about $26 billion, an all-time excessive, making it Apple’s fastest-growing phase. Progress is being pushed by sturdy app gross sales and a rising variety of paid subscriptions, which are actually over 1 billion. New AI-powered instruments may additionally open up new avenues for progress for Apple’s providers enterprise in a few methods. As an example, Apple may provide extra premium options and subscriptions because it enhances its apps with AI. Furthermore, the upper storage necessities for on-device processing and personalised fashions may additionally open up new avenues for monetization for Apple. Apple has over 2.3 billion energetic buyer units and if it is ready to promote compelling AI instruments costing a couple of {dollars} a month, it may add new income streams. See our breakdown of Apple’s services business revenues. Furthermore, not like different massive tech gamers who’ve put aside tens of billions of {dollars} on AI associated capex outlays, Apple is prone to leverage extra on-device processing, which means that its clients will find yourself footing the invoice for larger compute energy on their units. See How DeepSeek’s AI Model Impacts AVGO Stock?
The DeepSeek Breakthrough Advantages Apple
A current breakthrough from China’s DeepSeek AI mannequin has led to a shake-up for AI semiconductor shares like Nvidia. DeepSeek prioritizes software-driven useful resource optimization over {hardware} dependency, slicing AI mannequin coaching prices considerably. It reportedly spent simply $5.5 million to coach its V3 mannequin, far lower than the tons of of tens of millions OpenAI is estimated to have spent. This computing effectivity may cut back demand for high-end GPUs as AI firms undertake DeepSeek’s open-source strategies to optimize fashions. Whereas it is a headwind for semiconductor gamers like Nvidia, which depend on promoting highly effective GPUs for servers, it may benefit Apple. DeepSeek has developed smaller, distilled AI fashions that run effectively on primary {hardware} like PCs and smartphones, outperforming some bigger fashions on key benchmarks. Extra environment friendly AI fashions that run regionally may probably drive broader adoption as builders construct smaller, specialised fashions for particular units and use instances. If AI shifts towards light-weight fashions operating regionally, Apple stands to realize given its dominance in private computing. Apple’s M Sequence processors, identified for his or her excessive efficiency and energy effectivity, could possibly be significantly properly fitted to dealing with these workloads.
The rise in AAPL inventory over the past 4-year interval has been removed from constant, with annual returns being extra risky than the S&P 500. Returns for the inventory had been 35% in 2021, -26% in 2022, 49% in 2023, and 31% in 2024. The Trefis Excessive High quality (HQ) Portfolio, with a set of 30 shares, is way much less risky. And it has comfortably outperformed the S&P 500 over the past 4-year interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less danger versus the benchmark index; much less of a roller-coaster trip as evident in HQ Portfolio efficiency metrics. Given the present unsure macroeconomic surroundings round charge cuts and a number of wars, may AAPL face an identical state of affairs because it did in 2022 and underperform the S&P over the following 12 months – or will it see a powerful leap?
We stay impartial on AAPL inventory, with a $228 value estimate which is roughly consistent with the present market value. Whereas we see Apple as a significant beneficiary of AI, the inventory trades at a comparatively costly 31x ahead earnings, on condition that income is projected to progress at nearly mid-single-digit ranges for the following two years. Then again, we stay adverse on NVDA inventory, with a $93 value estimate, which is about 30% beneath the present market value.
| Returns | Feb 2025 MTD [1] |
Since begin of 2024 [1] |
2017-25 Whole [2] |
| AAPL Return | -3% | 19% | 750% |
| S&P 500 Return | 0% | 27% | 171% |
| Trefis Bolstered Worth Portfolio | -1% | 22% | 725% |
[1] Returns as of two/11/2025
[2] Cumulative complete returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
