Apple's AI Ambitions at WWDC 2025: Morgan Stanley Sees Long-Term Potential Despite Immediate Setbacks

Morgan Stanley's latest report highlights a noticeable absence of significant AI breakthroughs at Apple's WWDC 2025, suggesting a more prolonged trajectory for Apple's AI ambitions than previously anticipated. The report points to the limited upgrades of Apple's "Apple Intelligence" features, noting that a more personalized version of Siri is yet to be seen. Presently, only 20% of iPhones are equipped to support these new AI features, indicating further room for enhancement.

Despite these limitations, Morgan Stanley maintains its "Overweight" rating on Apple with a price target of $235, highlighting that although short-term investor sentiment might not see drastic changes, Apple's robust ecosystem, extensive user base, and strong privacy standards remain vital elements for emerging victorious in the AI era. Currently, pre-market trading shows Apple's stock remaining steady at $201, with a potential upside of 16% towards Morgan Stanley's target.

While Apple introduced several new "Apple Intelligence" functionalities during the WWDC, such as enhanced language support and deep integration with ChatGPT, the timeline remains prolonged, with a more personalized Siri not expected until "next year." This reflects ongoing investor patience, although opportunities for updates remain, with transformative upgrades potentially provided through premium "Apple Intelligence" subscriptions.

Moreover, the WWDC event didn't showcase new partnerships with Gemini nor progress in obtaining approval for Apple Intelligence in China. The anticipated Google Gemini partnership appears hindered by ongoing litigation involving Google and the Department of Justice. According to Morgan Stanley, receiving approval in China could be a significant catalyst, as surveys consistently show high interest among Chinese users in paying for Apple's AI innovations.

Though Apple has incorporated a "Liquid Glass" design across its hardware operating systems to enhance user experience, these enhancements primarily focus on improving visual consistency throughout its ecosystem. Meanwhile, iPad continues to evolve into a viable PC alternative, supported by recent significant updates that enhance its functionality and performance.

Despite Vision Pro consumer adoption being limited, Morgan Stanley emphasizes Apple's ongoing commitment to spatial computing, underscored by its latest visionOS updates. The company is projected to launch a more accessible version of Vision Pro by the end of 2026, which is expected to bolster adoption rates. Looking ahead, Apple must navigate its longer catalyst path, weighed by current market challenges and competitive dynamics in the rapidly evolving AI sector.