At the recent 2026 Worldwide Developers Conference (WWDC), Apple unveiled its new artificial intelligence system, "Apple Intelligence." Although the company's stock price fell more than 3% following the keynote, reversing earlier gains that had set new records, due to short-term market disappointment, major Wall Street investment firms believe this technological update will trigger a significant hardware upgrade cycle and accelerate monetization of its services business.
In a newly released report, Morgan Stanley analyst Erik Woodring points out that the current negative market reaction overlooks a major development opportunity. Because AI features like the newly upgraded Siri assistant have extremely high hardware performance requirements and must run on a unified memory architecture of at least 12GB, this means nearly 1.3 billion iPhones currently in use globally lack the hardware configuration to fully support the new Siri. Approximately 850 million of these iPhones are completely incapable of running the "Apple Intelligence" system. This low level of backward compatibility is expected to force a large number of existing users to abandon older models and switch to purchasing new-generation hardware with more powerful computing support.
Regarding the core AI applications launched, the report emphasizes that the "Image Playground" with deep image generation capabilities and the new photo editing tools are becoming Apple's "killer apps." In the future, users will be able to generate images using natural language and perform detailed photo corrections using spatial recomposition and intelligent cleanup tools.
Woodring reiterated an "Overweight" rating on Apple stock and raised the price target from $330 to $360, implying nearly 20% upside from a previous closing price. He predicts that due to computational resource limitations, core AI functions like image generation and app intent will be rate-limited, which will directly drive users to upgrade to more advanced iCloud+ service plans. It is estimated that by 2027, this new AI strategy will drive both Apple's hardware products and services business to achieve annual growth exceeding 10%.
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