Apple's Highly Anticipated Artificial Intelligence (AI) Reveal Could Be Only 14 Days Away. Should You Buy the Stock Now?
In the movie Home Alone, Macaulay Culkin's character, Kevin McCallister, was left behind to fend for himself. Some might see Apple (NASDAQ: AAPL) in a similar role in the race to develop artificial intelligence (AI) technology.
However, that view could soon change. Apple's highly anticipated AI reveal could be only 14 days away. Should you buy the stock now in anticipation of a big move?
Mark your calendars
Apple's management team has been dropping hints for a while that major news related to its AI strategy was coming. CEO Tim Cook said in the company's second-quarter earnings call earlier this month that Apple is "making significant investments" in generative AI. He added, "[W]e're looking forward to sharing some very exciting things with our customers soon."
Cook's comments came right after he plugged Apple's Worldwide Developers Conference (WWDC), scheduled to begin June 10, 2024. He gushed about this event: "We can't wait to reveal what we have in store."
Did Cook unequivocally state that Apple would announce new AI products at the WWDC? No. However, many Apple watchers believe the tech giant will use this conference to make a big AI splash.
The speculation is so rampant that I think Apple almost has to spill the beans, at least in part, as to what its AI plans are. With its stock languishing so far in 2024 while most of the other "Magnificent Seven" stocks are up by double-digit percentages (or, in Nvidia's case, triple digits), Apple has a lot riding on convincing skeptics that it won't be left in the dust with AI.
What Apple might announce
We'll have to wait a couple of weeks (presumably) to find out for sure what AI-related announcements Apple will make. However, there's no shortage of guesses about what's on the way.
Bloomberg's Mark Gurman thinks Apple's AI strategy is three-pronged:
An on-device large-language model (LLM)
A cloud-based LLM
A chatbot or two
Gurman expects Apple to use its own LLMs for devices and the cloud. However, he believes Apple will use OpenAI's GPT-4 chatbot and perhaps also go with Alphabet's Google Gemini.
The New York Times recently reported that Apple will unveil major improvements to AI assistant Siri at the WWDC. Citing sources "familiar with the company's work," the newspaper said the updated version of Siri will incorporate new generative AI technology.
Apple routinely highlights new versions of its operating systems at the annual WWDC events. The company is expected to announce iOS 18 with significant new AI functionality, including AI assistance in the Keynote and Pages apps, AI editing tools similar to those in Android smartphones, and automatically generated Apple Music playlists.
Should you buy Apple stock now?
Buying Apple stock now in hopes of a big bounce the week of June 10 carries three key risks. I'll discuss them in order of least concerning to most concerning.
First, it's possible that Apple won't deliver its grand AI reveal at the WWDC. A lot of people will be shocked if that's the case, but it's not entirely out of the question. Still, I'd bet on Apple making major AI announcements in a couple of weeks.
Second, Apple could announce great new AI functionality but not have its stock move much. So many rumors are flying around about what the company will unveil that they could already be largely baked into the share price. With Apple trading at a forward earnings multiple of 29 yet posting a year-over-year revenue decline of 4% in its latest quarter, there's no question that investors are banking on something to jump-start growth.
Third, Apple's new AI offerings could be underwhelming. If this happens (and I absolutely wouldn't rule it out), look for Apple stock to take a pounding.
With these risks in mind, I don't think investors should buy shares of Apple solely to profit from a potential short-term, AI-related catalyst. That said, I'm cautiously optimistic about the company's long-term prospects. With over 2 billion devices in use worldwide, Apple should be in a prime position to dominate edge AI -- the use of AI on devices where data is created rather than in the cloud. We'll hopefully learn more about how Apple plans to conquer this market in 14 days.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keith Speights has positions in Alphabet and Apple. The Motley Fool has positions in and recommends Alphabet, Apple, Nvidia, and The New York Times Co. The Motley Fool recommends the following options: short July 2024 $45 calls on The New York Times Co. The Motley Fool has a disclosure policy.
