The “Magnificent Seven” have been the driving force behind the current bull market. If there’s one trend that’s driving up the stock prices of big tech companies, it’s artificial intelligence (AI).
Virtually every member of the Magnificent Seven has a deep connection to the current push to advance AI:
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Nvidia is the leading GPU chip designer, serving growing data centers designed for training large language models.
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Microsoft, AmazonAnd alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) are leading public cloud providers, offering developers access to foundational models for building new AI-powered apps. All three have also made major investments in their own large language models and chip designs.
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Metaplatforms develops a leading large-scale language model, LLaMA, and spends billions in data centers to train and implement its AI in its apps.
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Tesla is heading towards a robotaxi service powered by its massive investments in AI.
Only one member of the Seven was exceptionally quiet about his AI: Apple (NASDAQ:AAPL). The iPhone maker typically doesn’t like to talk about what it’s working on until it’s ready for release. But that could change this summer.
Several analysts expect Apple to make several big AI-related announcements this year. And one analyst expects AI-related products and services to drive the stock price to $225, about 33% higher than the price at the time of this writing.
The summer of Apple AI
Bank of America Analyst Wamsi Mohan sees the recent decline in Apple shares as a great buying opportunity ahead of the company’s typical event schedule scheduled for this summer.
He expects Apple to make a number of AI-related announcements at its annual global developer conference in June. During the company’s annual shareholder meeting, CEO Tim Cook promised investors that Apple would “break new ground” in generative AI this year. That sets the stage for Cook to unveil some big products and services.
Nobody knows what Apple might announce. While management has stated that it is investing a lot of time and money into generative AI, it hasn’t revealed many details.
Last month, several reports surfaced that Apple was in talks with Google about bringing its Gemini AI to iPhones and other devices. Such a deal could be a big win for Alphabet, as its AI efforts have been dwarfed by competitors.
But installing someone else’s AI chatbot on your iPhone is hardly “breaking new ground.” Investors should expect more.
However, that may have to wait until the end of summer when Apple announces new iPhones. Mohan expects the 2024 iPhone model (presumably iPhone 16) to offer generative AI features on the device.
This could be a major breakthrough for AI and privacy, a key focus for Apple. The ability to run AI apps on a smartphone without sending data to a server for processing could open the door to many more AI-powered applications and an AI app store.
Apple is in a unique position to offer these features on its hardware because the company develops its own chips, which are among the most advanced mobile processors on the market. Additionally, they are specifically designed to run Apple software efficiently. This puts the company at the forefront when it comes to bringing on-device AI to the mass market.
Should you buy Apple before the next big announcement?
The stock has been one of the “Magnificent Seven” with the worst performance since the beginning of 2024. The stock is down more than 12%. Only Tesla stock underperformed, while all other stocks posted positive returns above that S&P 500 index.
But the current price decline could be a great opportunity for investors. The stock currently trades at just 25.6 times forward earnings estimates. While this multiple is higher than the S&P 500, it is below most other members of the Magnificent Seven.
Additionally, Apple’s strong liquidity and extensive capital return program are a good reason for investors to pay a premium for Apple shares. Mohan sees the company’s capital return program as another potential catalyst for shares.
Even though Apple doesn’t offer investors much to get excited about in the AI space, the company’s stability in its iPhone and services businesses makes it a great company. Adding new artificial intelligence capabilities, especially if they deliver innovation, could drive shares significantly higher. At the current price, Apple shares appear to have more upside potential than downside potential.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Levy has positions at Alphabet, Amazon, Apple, Meta Platforms and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
Artificial intelligence could drive this ‘Magnificent Seven’ stock up 33%, says a Wall Street analyst, originally published by The Motley Fool