Apple: Hey Siri, Let's Get Apple's AI Strategy Back on Track

Key Morningstar Metrics for Apple

• Fair Value Estimate
  : USD 270
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

Apple AAPL hosted its annual Worldwide Developers Conference on June 8, headlined by updates to its suite of artificial intelligence features and a revamped Siri voice assistant. The firm also announced incremental improvements across its software platforms and new child accounts and parental controls.

Why it matters: We like the AI updates, which fit our expectations. Apple looks closer to delivering the fully integrated personal AI experience initially announced in June 2024. To us, Apple devices are a natural platform for users to engage with AI, and Apple’s competitive position is improving.

• Apple focused on better core models, in partnership with Google’s Gemini. We see outsourcing the large core models as the right move, allowing Apple to focus on distilling these into what it does best: tightly integrated software features for users’ daily lives.
• A more natural language interface for Siri was the largest update. We like Apple’s opportunity to use an AI voice assistant to integrate complex queries across apps and use on-device processing of personal information securely. Apple’s ability to actually ship this in the fall is paramount.

The bottom line: We maintain our USD 270 fair value estimate for wide-moat Apple, as updates fit with our expectations that Apple would right the ship on its AI strategy. Shares dipped 1% intraday, likely due to modest disappointment over evolutionary updates and no large unforeseen announcements.

• We like Apple’s AI strategy, but don’t see it driving an inflection in iPhone sales that would raise our valuation. After a robust cycle for the iPhone 17 in 2026, we now see most installed devices to be AI-capable, meaning customers don’t need to buy a new phone to use AI software and the new Siri.
• Apple trades near all-time highs after a 50% run in the last 12 months. We see the stock as moderately overvalued, given our expectations for mid-single-digit iPhone revenue growth after a more than 20% growth cycle for iPhone in 2026.