Bank of America increases AAPL price target considering agentic and on-device AI
by Horace Dediu
Upgrades keep coming but are they justified?
Bank of America upped its price target on the tech giant, citing a potential boost from agentic artificial intelligence.
Shares rose 0.5% in premarket trading.
“In an agentic world, value accrues to the platform that controls user intent, personal context, app access, permissions, identity, authentication, payments, and trust,” analyst Wamsi Mohan wrote in a note to clients. “Smartphone is the scaled consumer device where these factors already converge. If AI assistants become the new front door to search, apps, commerce, scheduling, payments, and workflow completion, we think Apple should have meaningful leverage over model providers, app developers, merchants, advertisers, and payment networks.”
Mohan raised his price target to $380 from $330 and reiterated his Buy rating on Apple.
Delving deeper, Mohan said that the company's benefit in agentic AI comes from its semiconductors and iOS, as Apple's silicon can dictate what happens on a devices (which is important for latency, reliability, privacy and costs) and iOS will determine how the AI is used by the user. “Our analysis around token usage suggests Apple will need to rely on distributed compute (on device), Private Cloud Compute and third-party compute to deliver a robust AI experience,” Mohan added. “Removing the net cash neutral target, in our opinion, is a reflection of a new period of AI-driven investments to enable this agentic era.”As such, Mohan believes that the coming Siri redesign needs to be integrated into the iPhone and make it an agent that is capable of understanding intent, retrieving context, bringing up apps, and completing workflows. If this were to happen, an agentic version of Siri could boost fiscal 2030 revenue between $15B and $30B, or as much as $40B to $65B if users really became acclimated to it.
Source: Seeking Alpha
NB: Updated price targets with BofA change highlighted.
Share price at 310 is approaching the median of the current distribution. Upgrades are likely.
The basis of these has been a realization that distribution still matters in an age of AI and the profits might at least be parceled out to distributors.
Moreover, AI functionality may be agentic and require integration into the OS for cross-platform leverage. Not to mention privacy protection and safety guide rails. The more we learn about the application of AI the more it reveals itself to be sustaining to incumbents.
I am personally most impressed by how sustaining it is to Google, a company that seemed very vulnerable due to its dependence on link-based search. If Google can prosper with AI, certainly Apple can as well.
4 comments
FredHS ·
Google's search now includes AI, organically. It's nice. I recently cancelled by ChatGPT and Perplexity subscriptions for that reason.
We have barely seen what Agentic work can be done on Apple devices. Apple devices can take on smaller LLM tasks at a fraction of the cost per token. As well, work that is done with LLMs can be done with other techniques that are less compute intensive. No doubt WWDC shines a light - as in illustrate, illuminate, dazzle.
Sacto Joe ·
I wouldn't, and won’t, touch Alphabet with a 10’ pole. They are just another bunch of personal info pirates. And AI only makes that kind of piracy more insidious than ever.
Fortunately, Apple stands in the way. I’ll wait for Smart AND Safe Siri, no matter how long it takes.
deemery ·
My milage differs. I find it appallingly UNinformative. And then the new Google mechanism to trap links, "summarize them for my convenience" instead of actually taking me WHERE I WANT TO GO, is more Google bullshit.
Horace Dediu ·
The struggle to predict where AI will go as an interface can be made easier by asking what wealthy people do. This is helpful in many forms of technology adoption analysis as what technology often does is bring difficult jobs that required servants or experts to the common man of modest means. Schumpeter said "The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort."
Wealthy people hire others to do things for them today. Travel, driving, shopping, household care, child care, health care, administration, taxes, "personal assistance", etc. All you have to imagine is that what AI, with or without a robot, will do is what rich people enjoy by hiring staff. And it will do so at a fraction of the cost; marginally, even zero cost. That analysis immediately identifies jobs to be done, physical/non-physical dependencies and how hiring will be done. It's not hard to imagine that a trusted hiring agent is necessary. Also called the chief of staff or household manager. Guess who that will be.