Source: US Stock Research Institute Author: JR Research
$Apple (AAPL.US)$The lineup for its Global Developers Conference has been decided, which will take place on June 5th. Everyone's eyes are on Apple CEO Tim Cook's keynote speech on the first day, as Apple seems ready to launch the much-anticipated mixed reality (MR) device.
The Digital Times emphasized in a recent review that Apple's way of launching products before the Global Developers Conference was different than before.
The Electronic Times notes that “Apple has revealed upcoming software updates” ahead of the press conference.
The updates include “significant implications” for Apple's iPadOS and the announcement of “the launch of Final Cut Pro and Logic Pro”, which is believed to be a “departure” from Apple's habit of keeping such important releases secret before the Global Developers Conference.
As a result, some people speculate that Apple is probably “clearing the way” and making developers focus their attention on Apple's most important product launches “in the past eight years.”
Since the beginning of 2023, there has been enough publicity and anticipation for Apple's MR device launch. Notably, Meta is already one step ahead of Apple and “is about to launch Quest 3.”
Bloomberg analyst Gurman's review of Quest 3 (which is expected to sell for $400 higher than Quest 2) is positive, indicating that Meta is still expected to become the market share leader in the lower end market. Additionally, Gurman emphasized, “Meta may even benefit from Apple's help in promoting XR,” which will support CEO Mark Zuckerberg and his team of reality labs to continue advancing until Apple's subsequent mass market launch.
Still, Gurman has correctly recognized that the critical battle for supremacy between Meta and Apple may come down to who can launch a “killer app.”
Meta “has had an advantage over Apple for several years in the field of top-tier VR games.” However, Apple can mitigate this advantage by “providing access to thousands of iPad apps” and providing a simple xro conversion.
It is important to note that Apple has always targeted the high-end iPhone market, leaving Android to monopolize the less profitable budget market. As a result, Apple's hardware strategy on MR devices will be very different to protect the profit margins that Apple attaches great importance to.
So while Meta may currently have a leading position in the low-end market, Apple's market leadership in the consumer ecosystem may still make it more profitable to compete with Meta.
Meta has the world's largest social network with nearly 300,000 monthly active users. However, this did not translate into its leading position in the XR business. Despite this, sales of Meta's Quest devices reached “20 million units” by the end of March.
In contrast, Apple lowered its forecast from 3 million units to 900,000 units “due to factors such as cost considerations.” Furthermore, Apple doesn't expect to be able to make money in the beginning; MR equipment “sells roughly at cost.”
Gene Munster of Deepwater Asset Management (formerly Loup Ventures) predicts that by 2030, Apple's MR devices will account for 10% of its total revenue. He emphasized that Apple seemed to “enter the headphone market earlier than when it usually entered the new product category.” As a result, he said investors need to consider higher execution risks compared to other key product launches. Notably, he believes that “Apple headsets have two possible outcomes: either they fail or they are a huge success.”
It is likely that Apple sees the importance and urgency of defining the potential “post-iPhone era.” The rapid spread of the power of generative artificial intelligence may help companies such as Microsoft (Microsoft) make a comeback and achieve “platform transformation,” which may be detrimental to Apple's caretaker ambitions.
Meta is likely to see huge potential for interaction between AI and the metaverse. Nick Clegg, president of global affairs at Meta, emphasized at a recent event that “generative artificial intelligence and virtual worlds can coexist and complement each other.” He added, “Generative AI is critical to enhancing virtual world experiences and streamlining processes such as building virtual worlds.”
As a result, we believe Apple is likely to see the potential of generative artificial intelligence, as competitors are building their own artificial intelligence capabilities to define the next computing platform.
However, Stratechery's Ben Thompson reminds investors that Apple is still ready to benefit from open source generative artificial intelligence. Considering that Apple has 2 billion devices (or more than 1 billion installations), Apple is a behemoth in the consumer technology ecosystem. As a result, he emphasized, if Apple's devices can perform generative artificial intelligence at the edge, then the proliferation of open source models could help Apple.
Is that possible? Of course you can. Qualcomm (QCOM) CEO Cristiano Amon said in a recent interview that the leading Android chip maker has a generative AI strategy at the edge, which it sees as a continuing shift to edge computing that benefits manufacturers such as Qualcomm. As a result, the company has developed a “hardware architecture that can support high-performance artificial intelligence computing for various edge devices such as mobile phones, PCs, and automobiles.”
Who would bet with Tim Cook and his team that Apple doesn't have such a strategy? But most importantly, which company is better equipped than Apple to guide the transformation of MR or generative AI at the edge?
No matter when, we shouldn't underestimate the power of the Apple Moat. Furthermore, Nvidia CEO Hwang In-hoon's recent graduation speech showed why Apple's huge installed capacity gave it such a critical lead in competition with Microsoft, Amazon (AMZN), or Meta platforms.
Nvidia investors should know that Nvidia's data center GPU moat exceeds its hardware capabilities. It has built such a defensible moat through its CUDA ecosystem. However, Nvidia needed to solve a “chicken or egg problem” right from the start.
Why is that? Because CUDA didn't have a huge consumer installation base in the beginning. Without a huge installation base, Nvidia wouldn't be able to attract enough developers to develop for CUDA. Similarly, if it doesn't have enough developers to develop an app, it can't develop a customer that buys a huge installed base of apps.
So, how did Hwang In-hoon solve this dilemma? Here's what he said:
So to solve the question of whether the chicken comes first or the egg comes first, we used the GeForce GPU, which is our gaming GPU. It already has a huge gaming market to establish the installation base. ——E-Times
Just like that, Morningstar also confirmed the huge moat of Apple's iOS ecosystem:
With more and more ancillary products and services, the cost of switching from iOS is as high as ever. As time went on, it became more difficult to switch to iOS, and the non-Apple iOS experience did not exist.
Despite this, Apple's “F” valuation and less constructive price action suggest investors should be patient with the pullback before increasing their holdings. However, the lack of decisive selling signals suggests that Apple may continue to move higher and may retest its all-time highs.
However, the risk/reward is fairly balanced at current levels, and there isn't a single optimal entry point. Investors are likely to see a strong list at Apple's upcoming Global Developers Conference as Apple hopes to launch a potential new product.
edit/lambor