Here’s what to expect from Apple’s AI event and how to trade it

The pressure is heating up on Apple to flaunt its AI potential at its annual Worldwide Developers Conference on Monday. “While investor expectations are high, we think Apple could positively surprise, helping to unlock pent-up demand, accelerate iPhone replacement cycles, and sustain recent stock outperformance,” wrote Morgan Stanley’s Erik Woodring in a recent note to clients. Shares of Apple have lagged major technology peers since the start of the year, rising just 1.5%. The iPhone maker has come under criticism in part due to its lack of a direct artificial intelligence strategy , while investors reward companies such as Nvidia and Microsoft for offering a clear vision. While the Apple event isn’t typically regarded as a big market-moving stock catalyst, the highly anticipated announcement of new generative AI-enabled features changes the narrative this year, Woodring said. He added that shares tend to underperform the S & P 500 by 10 basis points on average on the day of the event. Analysts expect Apple to roll out an upgraded version of its Siri digital assistant that’s integrated into apps such as Notes, Messages and Safari and updated iOS 18 operating system software. Additional AI-powered features could include new emojis and photo editing, according to Woodring. He also expects the Tim Cook-led company to potentially announce a new — or expanded — partnership with OpenAI or Google for the updated operating system. Many of these features, however, may only be compatible with newer iPhone models, which may help drive demand and fuel an upgrade cycle, analysts say. “We view the presentation at WWDC to ‘tick all the boxes’ to convince investors that Apple is able to differentiate iPhone 16 (and future generations) with AI features relative to iPhone 15 and prior generations, and the same for future Mac and iPads, to successfully catalyze an upgrade cycle, while still debating the peak of the accelerated upgrade cycle,” wrote JPMorgan’s Samik Chatterjee. The analyst retained a $225 price target on Apple shares, implying 14% upside from Friday’s close. While Apple may not announce any groundbreaking features relative to peers, the company has a “unique advantage” due to its control over its own silicon design and its services ecosystem, wrote Citigroup analyst Atif Malik. AAPL YTD mountain Shares this year “The more than 2 billion installed base means the company has a large user base with massive amount of data to optimize user experience,” he wrote. Still, not everyone on Wall Street is convinced any Apple announcement will be a game changer. “We believe that AI functionality is likely to be useful and pervasive, but not necessarily revolutionary relative to what Google (and Samsung) have offered in their AI phones,” wrote Bernstein’s Toni Sacconaghi, although he acknowledged that interest in Monday’s event could trigger a more significant stock reaction.