Morgan Stanley upgrades Apple (AAPL.US): Partnership with Alibaba to enhance AI features for Chinese iPhone users to be a significant catalyst.

Apple AAPL is reportedly collaborating with Chinese e-commerce giant Alibaba BABA to develop Apple Intelligence features for the iPhone in the Chinese market, which analysts say could be a catalyst for growth. Apple and Alibaba did not immediately respond to requests for comment. If successful, the collaboration would be a major boost for iPhone upgrades, as Apple's sales in China are currently struggling. CEO Tim Cook said Apple saw record iPhone upgrades in the first fiscal quarter, with strong sales in markets with Apple Intelligence. However, the artificial intelligence feature has not been available in China since its launch in October last year, hitting Apple during a crucial holiday sales season. The Greater China region was the only region where Apple's sales fell year-on-year in the first quarter, and iPhone sales in China also fell short of analysts' expectations. Morgan Stanley analyst Katy Huberty told clients on Monday that the collaboration with Alibaba would be a "key catalyst for Apple's competitive position in China", and said it could solve Apple's iPhone sales decline in China. Morgan Stanley also said the move supported its "bullish expectations" for Apple ahead of the iPhone 17 launch this fall. Apple's shares rose more than 2% on Tuesday, while Alibaba's US shares rose 1%.