Technology industry analysts appleof (Nasdaq: AAPL) Every year, the Worldwide Developers Conference (WWDC) is a fixture on the calendar, as the tech giant often uses the event to announce important news that will have a bearing on its financial and stock performance. That was no different this year, as on Monday, the first day of WWDC, executives finally unveiled their long-awaited plans for artificial intelligence (AI).
The news sent the company's shares soaring on Tuesday, but is what the company revealed reason enough to buy Apple stock?
A quick look at Apple's AI plans
Apple has named the AI overhaul of its devices “Apple Intelligence.” The company plans to integrate AI features into the next version of its mobile operating system, iOS 18. The changes will affect many features of the already powerful device. It's worth pointing out that these AI features will only be available on the latest versions of the iPhone (15 Pro and 15 Pro Max) and some iPads and Macs with the necessary capabilities. But what are these features exactly? There are too many to go into in detail here, so let's just list a few.
One notable upgrade is that ChatGPT will now be accessible for free through Apple's famous digital assistant, Siri, without users having to create an account. Also, an AI-powered writing assistant will help you hone your writing. Other AI tools are used for a variety of functions, including creating and editing images, finding specific moments in videos, reading summaries of email messages without opening them, and providing summaries of video calls.
These tools will completely change the way people use Apple devices, hopefully for the better, but what does it mean for investors?
Focus on the big picture
All of these nifty AI tools will be integrated into Apple's operating system, making them available to users for free. How does that benefit Apple, especially since most of these tools aren't (and probably aren't at all) exclusive to Apple?
To take just one example, the company's new writing assistant is very similar to Grammarly's. But unlike Grammarly, Apple has 2 billion active devices around the world. The tech giant's loyal customer base (at least those with the right devices) will have automatic access to these tools. This will make competing platforms that perform similar tasks less attractive, especially those that require you to pay a fee to use them.
In other words, Apple's AI overhaul will help strengthen the company's ecosystem and make it more attractive to those already in it and to those watching from the outside. It may also motivate existing Apple customers to upgrade, since only those with new enough devices will have access to these tools. While many will likely not think they need to shell out a ton of money for a new iPhone to try out some AI features, there are almost certainly some who do. It will be interesting to see if sales of Apple's latest iPhones experience an AI-related boom.
But in the bigger picture, Apple's huge customer base gives the company a strong competitive advantage, and anything that makes this ecosystem stronger and more robust is good for its long-term prospects. Apple knows that its future lies in its Services division, whose success depends in large part on its installed base of devices. The Services division has been growing at a generally faster pace than other business segments for some time, and the most recent quarterly report was no exception.
Apple's revenue for the second quarter of its fiscal 2024, which ended March 30, was $90.8 billion, down 4% year over year. However, services revenue increased about 14% to $23.9 billion, the highest on record for the company.
This fast-growing, high-margin segment will ultimately have a huge impact on Apple's bottom line, and the arrival of Apple Intelligence helps the company get closer to that goal — making this a great reason to buy this tech stock.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Apple. The Motley Fool has a disclosure policy.
The post Should You Buy Apple Stock Following AI Announcement? was originally published by The Motley Fool
