How Apple might cash in on its latest artificial intelligence features
Some Wall Street analysts and money managers see a path to monetization ahead for Apple ‘s latest artificial intelligence features despite some near-term rollout headwinds. Earlier this month, the technology behemoth debuted its iPhone 16 , incorporating its new AI features known as Apple Intelligence. Last week, the company rolled out its latest iOS 18 operating system , but said it will issue the AI tools in a beta version later this fall. The new set of tools has also come under regulatory scrutiny in both Europe and China . With these hurdles threatening the initial rollout of Apple’s AI plan, and what many had hoped would be a significant upgrade cycle, some Wall Street analysts have begun raising questions around how the company might cash in on the feature. While including Apple Intelligence as a paid tool may not be on investors’ radar, some see a strong case for a future added cost down the road. MoffettNathanson co-founder Craig Moffett highlighted the potential of a paid AI add-on in a note to clients following the September event. While the tech giant never said Apple Intelligence would be a paid tool, a subscription-based digital assistant would serve as a “powerful” crosscurrent for an iPhone upgrade cycle, he said. However, Apple does not seem to be in a hurry to “double monetize” the product at the moment, Moffett added. “And that makes sense, given that use cases are still unclear, and the product is still in beta (and likely will be for some time), and Apple is still, at its core, a hardware company,” he wrote. “We interpreted the specific call out of its gratis inclusion in iOS to be a signal that it might be a while before Apple Intelligence is a stand-alone revenue driver for Apple.” AAPL YTD mountain Apple shares in 2024 The setup with Apple Intelligence could resemble the company’s Apple TV debut, notes CFRA Research analyst Angelo Zino. At first, Apple offered that service for free through various packages. Meta Platforms may also be undertaking a similar strategy by providing its large language model for free . “Their vision over time is to monetize Llama as more and more users get on that platform, get accustomed to it, and realize the benefits that they can offer,” Zino said of Meta. He expected Apple to raise the price on the new iPhone models to account for added costs of the AI tools, but he noted that a tough rollout with regulatory issues in China and Europe may hinder the cycle. That could put a potential hold on any plans to charge for certain AI features at least until the iPhone 17. Gene Munster, managing partner at Deepwater Asset Management, suspects Apple could announce some premium integration with OpenAI’s GPT or Google’s Gemini for a fee to customers as soon as early next year. But not everyone is convinced that Apple will turn its AI tool into a paid service, even if the product convinces some consumers to upgrade, said Gabelli Funds’ John Belton. The portfolio manager also sees an avenue for third-party developers to draw on Apple’s AI features to improve their offering. “It’s something that re-accelerates their existing core business,” he said.
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