JPMorgan sees AI-enabled iPhones creating a 5G-like upgrade cycle. What a boom like that would mean for Apple stock

Published Sun, Apr 14 202410:00 AM EDT

What will it take to get Apple stock and iPhone sales out of their slumps? Wall Street analysts and the Club see artificial intelligence as a key driver of investor enthusiasm and the next upgrade cycle. JPMorgan said in a note Thursday that an expected AI-enabled iPhone will create strong demand similar to what was seen when Apple put 5G capabilities into the iPhone 12 in October 2020. Customers who wanted faster next-generation mobile connectivity at the time were forced to upgrade — which boosted Apple's revenue and profits and eventually the stock. As we know, stronger company fundamentals can often lead to higher share prices. An increase in iPhone demand, comparable to the 5G frenzy in years past, would be welcomed news for the Club holding. Although details on Apple's AI offerings are limited, management's track record has shown that new innovative features to Apple's devices will improve the overall user experience. So, in the Club's view, why should the integration of AI be any different? Apple's success has never been contingent on being first to the market. Apple's iPod was not the first digital music player. The iPhone was not the first smartphone. The company's secret sauce has always been to make better mousetraps and wrap them into an ecosystem that users don't ever want to leave. We expect to learn more about Apple's AI strategy during the company's annual Worldwide Developer Conference (WWDC) in June. AAPL YTD mountain Apple YTD Apple shares on Thursday had their best single-session advance since last May — a gain of 4.3% — during a day when tech stocks with even a hint of AI optimism ahead soared. Bloomberg said that Apple is gearing up for new Mac laptops with AI-focused M4 chips. The report hasn't been confirmed and Apple declined CNBC's request for comment. Apple stock continued modestly higher on Friday — bucking a sharp sell-off in the overall market that was led by a major reversal in tech. It was the Club's best-performing stock of the week. Still, after last year's 48% rise, Apple shares have dropped nearly 9% so far in 2024. For comparison, the S & P 500 has gained 7% year to date. There's no sugarcoating it, 2024 got off to a rough start for Apple, with analysts questioning the stock's valuation and outwardly worrying about iPhone sales. Investor concerns only intensified as the magnitude of the iPhone sales slump in China became apparent in the data. Regulatory headwinds overseas and in the U.S. with the Justice Department's landmark antitrust case have also weighed on the mega-cap name. The Club did sell some Apple, along with seven other big tech stocks, on the first trading day of the new year . Apple's surge in 2023 grew the position to larger than the 5% weighting, which the Club doesn't like to exceed for any one stock in the portfolio. So, while profits were taken, the trim was more about resizing the position. Though it all, Jim Cramer has been steadfast in his "own it, don't trade it" Apple mantra. He has argued time and time again that riding out the trading ups and downs in Apple is the best way to profit from the stock. He has called Apple "one of the greatest performers of all times," also encouraging members to have "patience, patience, patience" on the stock. Jim on Thursday said investors "need to have faith because this [management] team will have something great" when it comes to AI. Referencing the Bloomberg report, Jim said, "If they can put these AI chips in the Mac, then they can do it on the iPhone." He added, "More importantly, if something else needs to be done to ignite growth, then guess what, I think it's time to have faith that [CEO] Tim Cook will come up with it." (Jim Cramer's Charitable Trust is long AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An Apple Store in Hamburg, Germany.

Christian Charisius | Picture Alliance | Getty Images