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Apple Stock Returns to Winning Path as AI Optimism Grows

(Bloomberg) — After months of struggles, Apple Inc. looks a lot more like the stock market leader it once was.

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Shares of the iPhone maker are on track for their best month since March 2023. They gained nearly 12% after a strong earnings report showed the return of growth and the company also announced the largest stock buyback in US history, a sign of its financial power. .

In addition, there is growing enthusiasm for its artificial intelligence projects. After falling 14% this year, the stock is poised to erase those losses. The stock rose 0.5% on Thursday, on track for its fourth consecutive positive session.

The latest leg of the rally came after a Bloomberg report that Apple is close to reaching a deal with OpenAI to use ChatGPT features in the new iPhone operating system. This had greater resonance after OpenAI on Monday demonstrated a faster and cheaper version of the AI ​​model that underpins ChatGPT, including a demonstration of new voice features.

The demo showed the potential of AI-powered digital assistants, and such features could boost Apple’s revenue growth by forcing customers to buy new iPhones and pay for more services, according to CEO Ken Mahoney from Mahoney Asset Management. He’s more convinced than ever that “AI will put Siri on steroids,” he said.

“Many details of Apple’s AI strategy are still under wraps, but I think AI is going to produce a huge upgrade cycle, one of the biggest it’s seen in quite some time. time,” Mahoney said.

A deal with OpenAI is not yet official and Apple has also held discussions with Alphabet Inc. to integrate Google’s Gemini AI engine into the iPhone. These talks are ongoing, according to Bloomberg News.

Google unveiled its own AI features this week, in a demonstration that was seen as a positive sign of its own technological capabilities. Investors have suggested that a partnership with either could be positive for Apple.

Read more: Google introduces generative AI in search in major update

“There’s no need to build things from scratch, or make a huge investment in AI just to get something to market,” Mahoney said. “Other companies have already done this work, and they will all want to be on the iPhone.”

A key event for Apple will take place at its Worldwide Developers Conference on June 10. The company is expected to introduce its next major software updates for the iPhone and other devices, where its new AI strategy will be front and center, Bloomberg reported.

Apple has faced concerns this year about stagnant revenue growth amid sluggish iPhone sales and weakness in China. Revenue fell 4% in Apple’s fiscal second quarter, the fifth contraction in the last six quarters. However, the Cupertino, California-based company predicted sales would increase by less than 10%, raising hopes for future expansion.

Of course, there’s still plenty of uncertainty, and with earnings estimated at 27x, Apple remains above its long-term average multiple in a period of tepid growth.

“If Apple can’t get its growth back, then it’s probably going to be a little expensive,” said Ryan Gorman, an independent analyst who was previously chief investment officer at Callesen Wealth Management.

“A deal with OpenAI or Alphabet would show that Apple is taking AI seriously,” he added. AI is “a capability you need to have to stay relevant, but is it really driving profit and revenue in the future?” That remains to be seen.”

Technical table of the day

Most important technology news

  • Michael Burry’s investment firm doubled down on bets on JD.com Inc and Alibaba Group Holding Ltd. in the first quarter as Chinese stocks bottomed out.

  • When Microsoft Corp. pledged four years ago to eliminate more carbon than it emits by the end of the decade, it was one of the most ambitious and comprehensive plans to tackle climate change. Today, the software giant’s relentless efforts to become the world leader in artificial intelligence are putting that goal in jeopardy.

  • Five years after Amazon.com Inc. raised wages to $15 an hour, half of the warehouse workers surveyed by researchers say they struggle to afford enough food or shelter.

  • Baidu Inc.’s revenue grew at the slowest pace in more than a year as China’s faltering economy put pressure on its core advertising business.

  • ServiceNow Inc. has increased its headcount and expanded into enterprise software using a simple strategy: hiring from its biggest competitor, Salesforce Inc.

Earnings expected on Thursday

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–With help from Sarah Zheng and Subrat Patnaik.

(Updates for market opening.)

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