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Investment bank JP Morgan believes Apple's combination of artificial intelligence and privacy will mean that a large portion of users will switch to the new iPhone 16 during 2025, and this should reassure investors who are concerned about the company's future.
Ahead of the WWDC announcement on June 10, 2024, JP Morgan analysts told investors that Apple will focus on artificial intelligence features on devices. It says there will be cloud and data center elements, but Apple will emphasize on-device privacy and show improvements to existing apps.
In a note published by AppleInsider, analysts predict that WWDC will be what they call a “check all the boxes” announcement that is specifically aimed at showing investors that Apple is not falling behind in the field of artificial intelligence. They say investors will be watching particularly closely for any deal between Apple and OpenAI or Google, but no matter how it's done, Apple's AI implementation will be implemented across all of its own apps.
JP Morgan doesn't foresee any third-party apps being able to take advantage of Apple's AI capabilities, at least not initially. However, this could change with the launch of the upcoming iPhone 16 lineup.
When that happens, the company expects an increase in App Store revenue. This is partly because they predict more apps will be sold, but they also believe developers will charge more for artificial intelligence features.
Analysts also expect the iPhone 16 line to benefit from AI announcements. Where it says about 15% of users are currently upgrading, JP Morgan believes this figure could rise to 20% — this is exactly what happened when 5G was introduced.
However, they also note that 5G has benefited from increased demand for smartphones during the pandemic. By comparison, the AI-powered iPhone will be released as Apple faces increased competition in China.
However, JP Morgan predicts that the update cycle will be longer due to AI, but also that it will begin in 2024, with the full weight of the iPhone 16 being felt in 2025. This is despite the fact that he previously stated that AI features will not appear in the iPhone until the release of the iPhone 17 in 2025.
Analysts still believe significant hardware improvements, such as more device RAM, will wait until the iPhone 17. But they say user interest in AI features will start driving sales sooner.
In addition, WWDC is expected to once again focus solely on software updates. It's a software conference, but sometimes new hardware has been unveiled, but that's not expected this year.
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