On September 9, Apple Inc. (AAPL) unveiled its newest flagship device, the iPhone 16, with a groundbreaking focus on artificial intelligence functionality. This cutting-edge device will revolutionize message organization, offer advanced writing suggestions, and introduce an enhanced Siri virtual assistant. Notably, the new smartphones will be powered by the latest A18 chips, boasting a 30% performance upgrade compared to its forerunner.

Despite the grand unveiling, the response to the presentation was rather lackluster. Google searches for iPhones remained subdued, media coverage of the event was minimal, and investors gave a collective shrug as Apple’s stock saw no movement for the day.

The question arises – why the tepid reaction?

Apple has historically not been at the technological forefront; however, what sets Apple apart is its prowess in refining technology for the masses rather than pioneering cutting-edge breakthroughs.

Contrary to the subdued public and media response, Apple’s integration of AI into its devices signifies a monumental step forward. More notably, Apple’s decision to develop its own in-house AI system rather than outsourcing this critical function marks a significant strategic shift.

If You Build it, They Will Come…

Apple’s move to construct its AI system holds immense importance in a landscape where many tech companies are relying on external resources for their AI capabilities.

Microsoft Corp. (MSFT) heavily leans on OpenAI for its generative AI systems, while Amazon.com Inc. (AMZN) plans to utilize Anthropic’s Claude in their upcoming Alexa smart speakers. Smaller entities often resort to incorporating third-party AI systems, with some accused of passing off external chatbots as proprietary technology through a practice known as “wrapping”.

This venture positions Apple as a significant purchaser of chips essential for training AI models and low-power AI chips crucial for running these applications on mobile devices.

The investment figures are staggering. Notably, OpenAI spent $100 million on the initial GPT-4 model while Google’s Gemini Ultra incurred double the cost. Given the escalating expenses associated with large language models (LLMs) across successive generations, Apple is expected to undertake substantial financial commitments.

The Beneficiaries

Apple’s embrace of on-device AI powered by the Arm-designed A18 chips will generate considerable revenue streams for Arm Holdings PLC (ARM). Additionally, the A18 chips are forecasted to bring in royalties double that of preceding generations.

Furthermore, the AI industry leader, NVIDIA Corporation (NVDA), is poised to capitalize on Apple’s implementation of advanced AI functionalities in the iPhone 16. In addition to on-device AI capabilities, the smartphones will offload complex queries to external data centers utilizing higher-powered chips, a space where NVIDIA shines.

Highlighting NVIDIA’s significance, consider the tale of Meta Platforms Inc.’s collaboration with Ray-Ban to introduce swift, next-gen smart glasses in 2023. These glasses leverage NVIDIA chips to relay real-time visual information to users in under two seconds, catering to a user base including the visually impaired.

NVIDIA’s high-speed processing capabilities are in high demand, allowing for quick and accurate AI calculations which are indispensable for modern applications.

Market Dominance Persists

Notwithstanding recent market fluctuations, NVIDIA’s prowess remains unshaken. The market correction post-quarterly earnings was seen as a buying opportunity by analysts, underpinned by NVIDIA’s steadfast technological advancements.

While market expectations may have varied, NVIDIA’s recent results affirm its industry-leading position. As a transformative player, this dip provides a compelling entry point for investors.

Following the brief downturn, NVIDIA rebounded significantly with a surge of over 15%, reasserting its dominance in the AI chip sector.

The Final Verdict

Apple’s foray into AI technology heralds exciting prospects for iPhone enthusiasts. Speculation abounds on whether the unfolding Apple Intelligence era will ignite a supercycle of iPhone upgrades and rejuvenate device sales. Moreover, Apple’s entry into AI signifies a milestone that could mainstream AI acceptance among consumers.

Only time will tell the full extent of these developments and their financial implications, particularly for the chip manufacturers monopolizing the technology crucial for Apple’s innovations.

At the forefront stands NVIDIA, an exemplar of technological prowess with exceptional growth potential. We’ve witnessed substantial gains in Growth Investor‘s position in NVIDIA, marking the beginning of what could be a lucrative future.

The journey is just commencing – the forthcoming AI Revolution promises transformative changes at an accelerated pace.

For further insights, a comprehensive report on nine top-tier AI and quantum computing stocks awaits exploration.

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Sincerely,

Louis Navellier

Editor, Market 360

Disclosure: The author, directly or indirectly, holds securities in the following entities mentioned in the article: Microsoft Corp. (MSFT) and NVIDIA Corporation (NVDA).