Why Apple’s AI success hinges on the iPhone
Subscribe to enjoy similar stories. Apple needs all of its iPhones to sell well. But it really needs the latest crop to succeed if the world’s most valuable tech giant is going to secure a foothold in the artificial-intelligence race.
That explains why the health of the new iPhone cycle is such a key question facing Apple ahead of its fiscal fourth-quarter report, slated for Thursday afternoon. Worries have grown as data points such as shorter shipping times and earnings reports from wireless carriers suggest the iPhone 16 family isn’t flying off the shelves. Brandon Nispel of KeyBanc Capital Markets downgraded Apple’s shares to a sell rating on Friday, citing in part data from AT&T, Verizon and T-Mobile showing wireless upgrade rates in the U.S.
were down 9% year over year in the third quarter. “We think the data suggests a slow upgrade path," Nispel wrote. The phased launch of Apple’s first generative AI service complicates the picture further; the first features of Apple Intelligence are launching this week—more than a month after the iPhone 16 started shipping.
Apple plans to continue adding AI features to its iOS software throughout next year, which may drag out iPhone 16 adoption more than usual. “Gradual AI feature rollout could be hindering a more pronounced upgrade cycle," Krish Sankar of TD Cowen wrote in a note to clients on Friday. The concerns have weighed on Apple’s stock.
The shares are up less than 5% since the iPhone 16’s launch event in early September, which lags behind other megacap techs and the S&P 500 in that time. Apple has experienced weak iPhone cycles before, given the maturity of the business and the longer periods that consumers are going between upgrades. But the company’s hardware-centric
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