Apple Faces AI Uncertainty Ahead of Q4 Earnings

Wedbush has maintained its "outperform" rating and $270 price target for Apple Inc. ahead of the company's fourth-quarter earnings release. Led by analyst Daniel Ives, the firm expects the market to focus on whether Apple can deliver a strong financial report, with particular attention on the slight recovery of iPhone sales in China.

This quarter's data from Asia's supply chain indicates stable global demand for iPhones, with signs of improvement in the Chinese market. This core market has faced growth pressures over the past year due to intense competition from domestic smartphone manufacturers, making its recovery crucial for Apple. Additionally, analysts anticipate that the services business will continue to show robust growth, serving as a highlight of this quarter's performance.

The upcoming earnings report is seen as a prelude to the September launch of the iPhone 17. Market attention will be on CEO Tim Cook's comments during the earnings call regarding product prospects and demand expectations. Ives and his team predict that the iPhone 17 will drive accelerated growth in device sales as global installed users upgrade their devices. It is estimated that approximately 20% of the 1.5 billion iPhones worldwide have not been upgraded in over four years.

However, the biggest uncertainty remains Apple's artificial intelligence (AI) strategy. As the tech industry focuses on the 40-year technological revolution of AI commercialization, Apple has yet to show substantial progress. Analysts emphasize that Apple's innovation in AI cannot rely solely on internal development. A successful AI commercialization strategy could potentially add $75 per share to Apple's valuation, leaving Cook with limited time to break through.

The analysts suggest that Apple, known for its independent research and development rather than acquisitions, needs to adapt to the current era. They recommend that Apple should quickly build its AI ecosystem through acquisitions of high-quality targets. This strategic move would fully activate Apple's AI strategy.

Investors and developers are growing impatient, and Apple must achieve significant breakthroughs in its AI strategy. Despite expectations that Cook will continue to lead Apple for at least another five years, he faces three major challenges: pricing issues for iPhones due to tariffs, political and economic risks in India's supply chain, and the lack of a foundational AI strategy. This chapter will determine Cook's legacy.

Ives and his team conclude that Cook and Apple's management must confront the new era of AI-driven technological revolution. If they continue to remain stagnant, they risk leaving a significant strategic error in the annals of technology history.