Source: Wall Street Journal
Morgan Stanley believes that, despite Apple launching the "Apple Intelligence" feature, the upgrades to AI functionalities are limited, and a more personalized Siri will still have to wait; currently, only 20% of iPhones support the new AI features. With its strong ecosystem, user base, and privacy standards, Apple still holds key elements for winning in the AI era, but short-term investor sentiment may not see significant change.
Morgan Stanley believes that, $Apple (AAPL.US)$ WWDC 2025 lacks significant breakthroughs, and the path to realizing its AI story may be much longer.
According to news from the Wind Trading Desk, Morgan Stanley released a research report on the 10th, stating that Apple's recent updates lack major AI breakthroughs, indicating that Apple's progress in the AI field may be slower than expected.
Although Apple has launched the "Apple Intelligence" feature, the upgrade of AI functionalities is limited, and a more personalized Siri still needs to be awaited, with only 20% of iPhones currently supporting the new AI features. Additionally, collaboration with Google Gemini and the approval progress of Apple Intelligence in the Chinese market is insufficient.
Morgan Stanley still maintains Apple's "Shareholding" rating and a target price of $235, believing that Apple, with its strong ecosystem, user base, and privacy standards, has key elements to win in the AI era. However, investor sentiment may not see significant changes in the short term. In Pre-Market Trading, Apple's stock price is basically flat at $201, with a 16% upside potential to Morgan Stanley's target price.
AI functionalities are progressing slowly, and the Siri upgrade still needs to be awaited.
Morgan Stanley stated that Apple introduced several new Apple Intelligence features at WWDC 2025, including broader language support, deep integration with ChatGPT, and real-time translation. Notably, Apple has opened its large language model to over 30 million global developers, resembling a modernized App Store moment.
However, software chief Craig Federighi previewed a more personalized Siri that will launch "in the next year," aligning with investor expectations but the timeline remains lengthy. Currently, only 20% of iPhones can support Apple Intelligence, meaning there is still upgrade potential. If Apple charges $9.99/month for the premium "Apple Intelligence" subscription, just a 10% adoption rate from the install base could cover all payments made to Google TAC.
Significant cooperation progress is lacking, and key markets remain to be broken into.
This conference neither announced new Gemini partnerships nor secured approval for Apple Intelligence in China. Morgan Stanley indicated that the potential Google Gemini cooperation seems to be hampered by the Google/Department of Justice case.
In Morgan Stanley's view, approval for Apple Intelligence in China is a more significant catalyst. The 2024 November AlphaWise smartphone survey from Morgan Stanley shows that Chinese users have the highest interest in Apple Intelligence, with 90% of iPhone users indicating they would be willing to pay for Apple Intelligence.
"Liquid Glass" design unifies the ecosystem experience.
Apple has introduced a "Liquid Glass" design across all hardware operating systems, combining the optical qualities of glass with the fluidity of liquid, emphasizing transparency and light as key features to enhance user experience. Morgan Stanley believes these enhancements help create a more unified experience across hardware devices, strengthening the ecosystem experience.
Apple is maximizing the content displayed on the screen through a semi-transparent toolbar with dynamic controls while using applications, allowing for easier navigation between apps.
Overall, these improvements remind us of past global developer conferences, highlighting Apple's innate attention to detail. However, as financial Analysts, we believe the significance of these upgrades is relatively minor.
The iPad is becoming a true replacement for the PC.
Morgan Stanley believes the iPad has made significant progress in the last 1-2 years, mainly due to the powerful performance of the iPad Pro and the latest updates to iPadOS. Today's announcement further advances this progress, with new features such as window tiling, control, and size adjustment making the iPad a true PC alternative.
Morgan Stanley's data shows that the iPad's production volume in the first half of 2025 is expected to grow by 9% year-on-year, while PC shipments (including Windows 11 upgrades) are expected to grow by only 3%.
Vision Pro showcases the commitment to spatial computing.
Despite the extremely limited consumer adoption of Vision Pro, Morgan Stanley believes Apple's visionOS upgrade clearly demonstrates Apple's commitment to its spatial computing platform. Apple is still expected to release a more design-friendly, down-spec AR (and AI) version of Vision Pro by the end of 2026 for broader adoption.
Investment outlook: Long-term potential coexists with short-term challenges.
Morgan Stanley maintains a Target Price of $235 for Apple, based on a 7.9 times EV/Sales multiple for the fiscal year 2026. Although Apple is lagging behind today's AI winners in AI advancements, the company still possesses six key differentiating advantages:
A unified hardware, software, service, and chip architecture;
Rich personalized data;
A leading technology ecosystem with over 1.5 billion users and 2.4 billion devices;
Over 30 million global developer partners;
A balance sheet capable of supporting computing investments;
Industry-leading privacy standards.
However, until investors gain greater confidence in the differentiation and monetization of an agent-based, Siri-supported AI assistant, sentiment around the Stocks is unlikely to see a major shift, making Apple's catalyst path longer than typical at this point in the cycle.
Editor/jayden
