AI Accessibility Coming to More Than 1 Billion

Apple’s AI Announcement

This week Apple (AAPL) held its yearly worldwide Developers Conference (WWDC) in Cupertino, California. Apple releases new innovations each year at the week-long event, from new product offerings like iPhones, iPads and iMacs to technological innovations and upgraded features. This year did not disappoint, and Apple shed light into its much-anticipated integration with artificial intelligence (AI). Investors felt the momentum, as Apple stock had its best day since November 2022 on Tuesday. Apple now has officially joined the AI race against other large cap tech names in working to fully adopt the technology before competitors.

In our Large Cap Core strategy, we opened a new position in AAPL in the middle of the first quarter. Our expectation was that the DOJ lawsuit would not be a drag on the company, a new stock buyback would be announced along with a powerful WWDC early summer – all of which came true. Our position grew throughout the middle of April while the stock bottomed out and the position became overweight the index by late April. As it stands, AAPL is the top position in our Large Cap Core portfolio and outweighs the S&P 500 by more than 100 basis points. AAPL currently holds a 6.6% weighting in the S&P 500 and 8.5% in the Nasdaq with significant buying to follow the recent strong performance.

Apple Intelligence

Apple Intelligence was the highlight of day one. This is Apple’s own AI, which works with Siri to draw information from users’ data in a private, secure way. Apple announced its new partnership with Open AI, the creators of ChatGPT, to have its AI features fully integrated in the iPhone 15 and newer models. The AI system will be able to answer questions by pulling data from apps, searching emails, finding text messages and more. The software will also be able to create AI-generated emojis and pictures, transcript calls in real time and take actions across apps. If the system finds it most optimal to use ChatGPT for a search, permission will need to be granted for ChatGPT to be used.

In Monday’s event, Apple mentioned that Siri makes 1.5 billion voice requests each day. Similar to ChatGPT, Siri will now be able to maintain conversational context, meaning a back-and-forth conversation can be held. A typing option for Siri will also be available if voice commands do not want to be used. These functionalities will make iPhones more useful and necessary than ever before. From creating events, sending emails and texts, summarizing articles and creating digestible notes, Apple’s upgrades will greatly enhance user productivity.

An example using Apple Intelligence was shown at the event. The host asked Siri “When is my mom’s flight landing?” and Siri was able to cross-reference flight information shared over email in seconds to provide an answer. The host then asked, “What was our lunch plan?” and Siri was able to search though text messages to find when and where lunch was previously discussed. Lastly, asking “How long will it take us to get there from the airport?” will reference “there” as the restaurant and pull up Apple Maps to show the directions and timing. This shows one of many ways Apple Intelligence will be able to quickly assist users in navigating apps, finding information and filtering through data.

Chart 1: Chat-GPT Will Be Integrated With Apple Products in iOS 18^[1]

Improved Device Feature

Apple announced many new updates across its devices. Apple Vision Pro, Apple’s newest product, will now be powered by VisionOS 2. VisionOS 2 upgrades how photos can be viewed with the Vision Pro by creating 3D pictures through the use of spatial computing. The update includes a larger viewing area, travel mode for a more immersive experience on the road, improved hand gesture features and more. The Vision Pro will also become available in eight new countries later this month.

Apple WatchOS 11 also received several upgrades. The duration and intensity of workouts combined with calorimetry data will provide an effort rating, scaling from one to ten. Altogether, a training load will show insight into how prepared the body is to take on activities. The new vitals app gives a snapshot of health data with historical averages for comparison. Vitals will be highlighted when outside of the average range, and once multiple vitals are out of range, the app will send an alert with possible reasonings as to why. These updates bring Apple Watch capabilities closer to other health wearable devices like Garmin, Whoop and Oura.

With iOS 18, the iPad is getting updates to screensharing, freeform and customization. The big announcement was the calculator coming to iPad. Using Apple Pencil with the calculator application accesses Math Notes, a new ability for quick calculations. By writing out an equation and including an equal sign, the app will calculate the answer to the equation for you. Scientific equations can be solved just as easily as basic formulas. This function will work in the Notes app as well.

Finally, updates came to macOS, called macOS Sequoia. Similar updates to Messages, Maps, and Math Notes will be accessible on the mac. iPhones now can be mirrored on the mac, bringing full access to your phone through the mac desktop. Apple said with macOS Sequoia, Safari is the world’s fastest browser with four more hours of battery life than chrome when streaming videos. A new feature, called Highlights, will bring the most relevant information from a webpage to the top of the screen for easy access. Gaming advancements were also announced for the mac.

Developer betas for the new iOS features are available now, public betas will be available next month and all new releases will be available later this fall.

Application Updates

iOS 18 comes with new customization features. Home screens and app locations will be updated, with the ability to change app colors and place them in any desired location on the home screen. The control center is also more customizable, letting users add more widgets and toggle between multiple screens of controls.

Many of the most-used Apple apps also received updates. Trails on Apple Maps can be saved to the phone and accessed offline. For situations where cellular data may be lost, detailed offline maps can provide turn-by-turn voice guidance to help navigate whereabouts.

Messages will be getting an upgrade, including more ways to send tap backs, ‘send later’ abilities and text effects. The iPhone 14 and later models will soon be able to send messages without Wi-Fi or cellular data by connecting to satellites.

Apple Wallet introduced “Tap to Cash,” a new way to exchange Apple Cash through tapping phones. New features and ways to pay online through Apple Wallet were also announced.

The Photos app received its biggest redesign ever. The redesign helps the app be more organized and provides filters to search to find photos quickly. With Apple Intelligence, you can ask Siri a prompt like “show me pictures from my hike at Yosemite Park” and Siri will filter for the respective pictures.

Furthermore, privacy enhancements will be included in the update. Specific apps can soon be locked and require authentication to be opened through Face ID, Touch ID or a passcode. The app can be hidden from the home screen and no notifications will appear if locked. Also, contacts can be chosen to only be found on specific apps, and paired accessories will be able to be connected to specific apps instead of the entire device.

A New Era for Apple

Dan Ives, Managing Director at Wedbush Securities, a top-rated Wall Street analyst, called Apple’s event a “home run,” and said it delivered on every item it needed to. He believes this is the start of an AI-driven super cycle and will be a game changer for Apple Services. Out of 1.5 billion iPhones, 270 million have not upgraded in over four years – and these new upgrades could be the turning point for a new upgrade cycle. We completely agree, and this is the reason it is our largest position at an 8.1% weighting in our Large Cap Core portfolio. 

This new offering brings AI and ChatGPT to billions of consumers and integrates the technology into everyday life. Only 5% of current users can access Apple Intelligence once it is released, so a wave of upgrades will be coming. It’s not a matter of if, but when they upgrade. The bottom line: this is one of the largest Apple releases in the last few years and is the beginning of a new wave of advancement for its product offerings.

^[1] Source: Apple. As of June 10, 2024.