Apple Stock Is Rising As It Reviews AI Deal With Meta

Apple shares rose 1.1% to $209.74 on Monday, returning toward the all-time high of $216. Its market capitalization has now surpassed that of Nvidia at $3.2 trillion, meaning only Microsoft is bigger, with a value of $3.3 trillion.

Such deals could help Apple avoid becoming too dependent on OpenAI or Microsoft-backed Alphabet.
It is

Google when it comes to AI.

Google currently pays Apple billions of dollars a year to be the default search engine on the iPhone and in the Safari Internet browser.

Apple does not offer a similar model when it comes to AI. Instead, he suggested that AI companies could sell premium subscriptions to their services and that Apple would keep a share of the money generated through its devices, according to The Journal. This could help Apple allay fears of AI disruption to its lucrative App Store.

“We anticipate that developers over the next 6-12 months will create hundreds of AI-driven generative applications that will be key ingredients in Apple’s recipe for success,” the Wedbush analyst wrote on Sunday, Daniel Ives, in a research note.

Ives has an Outperform rating and a $275 price target on Apple, the highest on all of Wall Street.

The real prize for Apple would be an AI-powered wave of purchases of its next iPhone 16 model, expected this fall. Ben Reitzes, an analyst at Melius Research, estimates that about 1.5 billion current iPhones could be candidates for upgrades in the next sales cycle.

“We expect iPhone growth to begin to accelerate noticeably by the December quarter of this calendar year, driven by the United States and improvement in China. In addition to higher unit count growth, we believe the iPhone mix will be a tailwind as customers opt for larger storage options and higher-end Pro/Max options,” Reitzes wrote .

Reitzes increased his price target on Apple to $260 from $227, while maintaining a Buy rating.

The new price target is based on a price-to-earnings multiple of 30 times Reitzes’ forecast for Apple’s earnings for its 2026 fiscal year.

However, as Apple seeks to expand its AI ecosystem, it faces allegations that its existing businesses are not open enough. The European Union has accused Apple of failing to comply with a new digital competition law, saying its App Store does not allow developers to freely direct customers to other ways of making purchases.

The charges were announced on Monday and are the first to be issued under the EU’s digital markets law, which came into force earlier this year. Apple could be fined up to 10% of its global revenue if European regulators ultimately determine the company violated DMA rules.

Apple did not immediately respond to a request for comment from Barron’s. Apple said it has made changes in recent months to comply with the DMA and is confident its plan complies with the law, according to the Journal.

Write to Adam Clark at adam.clark@barrons.com