Apple's AI Ambitions Face Delays, Morgan Stanley Says

Apple's recent WWDC 2025 conference has been met with mixed reactions from analysts, particularly from Morgan Stanley, who noted the lack of significant AI updates. This absence of major breakthroughs suggests that Apple's journey towards realizing its AI ambitions may be longer than anticipated.

During the conference, Apple introduced several new features under the "Apple Intelligence" umbrella, including expanded language support, deeper integration with ChatGPT, and real-time translation capabilities. These updates were made available to over 30 million global developers, akin to a modernized App Store moment. However, the more personalized version of Siri, which was previewed by software chief Craig Federighi, is still slated for release within the next year, indicating a longer timeline for significant AI advancements. Currently, only 20% of iPhones support the new AI functionalities, leaving ample room for future upgrades.

One of the notable absences from the conference was the announcement of new partnerships with Google's Gemini or the approval of Apple Intelligence in China. Morgan Stanley highlighted that potential collaborations with Google seem to be hindered by legal issues, and the approval of Apple Intelligence in China is seen as a crucial catalyst for its success. The firm's survey from November 2024 indicated that Chinese users have the highest interest in Apple Intelligence, with 90% of iPhone users expressing willingness to pay for the service.

Apple also introduced a unified design language called "Liquid Glass" across all its hardware operating systems. This design combines the optical qualities of glass with the fluidity of liquid, emphasizing transparency and light as key features to enhance user experience. The firm believes these enhancements will create a more cohesive experience across hardware devices, strengthening the overall ecosystem. Additionally, Apple's use of semi-transparent toolbars with dynamic control groups in applications maximizes screen content, making navigation between apps more seamless.

The iPad has also made significant strides in the past one to two years, largely due to the powerful performance of the iPad Pro and the latest updates to iPadOS. The new features, such as window tiling, control, and size adjustment, further position the iPad as a viable PC replacement. According to Morgan Stanley, iPad production volumes grew by 9% year-over-year in the first half of 2025, while PC shipments, including those with Windows 11 upgrades, are expected to grow by only 3%.

Despite limited consumer adoption, Apple's Vision Pro device showcased the company's commitment to its spatial computing platform. The firm expects a more consumer-friendly, lower-cost AR (and AI) version of Vision Pro to be released by the end of 2026, aiming for broader adoption.

Morgan Stanley maintains its "Overweight" rating and a target price of 235 dollars for Apple, based on a 7.9x EV/sales multiple for the fiscal year 2026. While Apple lags behind current AI leaders, the company possesses six key differentiators: a unified hardware, software, services, and chip architecture; rich personalized data; a leading technology ecosystem with over 1.5 billion users and 2.4 billion devices; over 30 million global developer partners; a balance sheet capable of supporting computational investments; and industry-leading privacy standards.

However, investor sentiment is unlikely to see a significant shift until there is greater confidence in the differentiation and monetization potential of proxy-based, Siri-supported AI assistants. This makes Apple's catalyst path longer than typical for this stage of the cycle.