Is the AI-Capable iPhone 16 the Start of a Sales Super-Cycle?

Key Points

• Apple's new AI-ready iPhone will be available in stores on Sept. 20.
• Some say the device's significant improvements will start a new "super-cycle" in iPhone purchases.
• With the most game changing improvements still months away, it may take longer than many think for this to occur.

Tech device nerds are buzzing. Apple NASDAQ: AAPL just unveiled its new, AI-capable iPhone 16s. However, the excitement isn’t just around the devices themselves; investors are also talking. Wedbush raised their price target immediately after the official event displaying the new devices, while Goldman Sachs NYSE: GS and UBS NYSE: UBS raised their targets days before.

Those three analysts have an average price target for Apple of $271, implying an upside of 19%. So, is Apple’s new iPhone really something that could drive the stock price higher? Or is it simply business as usual, consistent with the technology firm’s annual release of its new smartphone? Let’s analyze different perspectives on this and come up with an answer.

What Analysts are Saying about the AI-Capable iPhone 16

The biggest source of excitement around the iPhone 16 is AI. Some analysts believe that AI features can start a new “super-cycle” of iPhone buying that can drive massive sales.

According to MT Newswires, Wedbush analyst Daniel Ives believes in the super-cycle saying “roughly 300 million iPhones globally have not upgraded in over 4 years." The implication is that, with so many iPhones yet to be upgraded in recent years, AI capabilities will be the push consumers need to upgrade. This is certainly part of the justification for Wedbush raising its Apple price target to $300.

UBS is significantly less bullish on the new technology, saying that there is “no groundbreaking AI use case." The firm's price target is the lowest of the three at $236.

Siri’s Upgrades Will Shine, but Not Quite Yet

For now, new iPhone purchasers will have to wait some time before the AI features of the iPhone 16 kick in. Apple's new operating system contains its AI technology, Apple Intelligence, rather than the iPhone itself. iOS 18.1 is not set to launch until October and will come with a modestly useful set of AI features.

In December, the next version of the software is set to come out, which will include more useful features like integration with OpenAI’s ChatGPT. This will allow users to give ChatGPT access to information on their iPhones. Then, ChatGPT could provide personalized answers based on that information.

However, Bloomberg reporter Mark Gurman points out that the most useful changes will be those related to Apple’s voice assistant, Siri. AI improvements to Siri could offer very tangible boosts to convenience and productivity. This could include things like asking “Hey Siri, when does my mom’s flight get in?"

This is very convenient as someone doesn’t even need to look at their phone to get the information they need. It also could save significant amounts of time in not having to scroll through reams of messages, for example. However, these features are not set to be available until early 2025.

Theoretically, if more software integrations become available, Siri could boost work productivity. It could do things like find available times on coworkers' calendars and schedule a meeting, saving time spent on simple tasks.

Exposure to AI Capabilities Could Drive a Super-Cycle in Late 2025

When it comes to AI, because it is such a new technology, people often must try it before buying in. This is especially true as concerns about AI greatly outweigh excitement, according to a Pew Research survey. However, this may be because they lack experience with it. Just 18% of adults in that survey say that they have used ChatGPT.

A Boston Consulting Group survey found that people’s feelings around AI change dramatically once they use it. Before using AI, only 39% of people had excitement around it. But after utilizing just one AI service, the number increased to 68%, and continued to rise as more AI services were used. 

Apple's upcoming AI features should expose many more people to AI as they see their friends, family, and coworkers use it. This is especially true for Siri, as people often communicate with Siri in front of others.

The iPhone has the largest market share of any U.S. smartphone. So, seeing its features could spark a super-cycle as people want the tech for themselves. However, it will take time, as the updates to Siri will not occur for six months or so.

After that, people may take another six months to become familiar with the technology and decide to upgrade. By that time, a new iPhone will likely be out. Based on this, the iPhone 17 is a more likely product for a super-cycle to take place. After that release, Apple shares could see a massive boost.