tiprankstipranks
Apple’s AI Push May Take Time to Become a Money-Spinner
Market News

Apple’s AI Push May Take Time to Become a Money-Spinner

Story Highlights

Apple’s OpenAI partnership does not involve a monetary component. The company’s AI push could take a while before making substantial contributions to its financial performance.

Yesterday, Apple (NASDAQ:AAPL) reclaimed its spot as the most valuable company, dislodging Microsoft (NASDAQ:MSFT) amid an AI-fueled rally. Ironically, the surge in Apple’s share price came after it announced a major deal with OpenAI, which is backed by Microsoft itself. Still, it could take some time before Apple’s AI push becomes a real money-spinner.

Is Apple Paying OpenAI for its Partnership?

For starters, neither Apple nor OpenAI are paying each other in cash for the partnership. That’s right, Apple is integrating ChatGPT into its iPhones, iPads, and Macs without paying a dime.

While the partnership could generate significant revenue for both companies in the long term, for now, its contribution could be minimal. Apple believes that expanding ChatGPT’s reach to millions of users via its devices has a similar or even higher value compared to monetary payments. On the other hand, OpenAI still needs to dole out dollars to Microsoft for hosting ChatGPT on its servers. This means higher expenses for OpenAI with an uptick in ChatGPT’s user base.

What’s Next in Apple’s AI Strategy?

For now, Apple plans to offer ChatGPT for free on its products. However, converting free users to paying ones could generate revenue for both Apple and OpenAI. Importantly, Apple isn’t stopping at just ChatGPT. The tech giant also plans to offer Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Gemini chatbot on its devices, according to Bloomberg.

Apple’s AI Offerings Could Mean Higher Sales

A key point to note in Apple’s AI push is that only 5% of iPhones and 52% of iPads in circulation are currently equipped to support its “Apple Intelligence.” Consequently, any potential boost to Apple’s device sales will hinge on the effectiveness of its AI offerings in convincing users to upgrade to newer devices.

Which Stock Is Best – AAPL or MSFT?

Meanwhile, the Street seems to be placing its faith in OpenAI’s backer, Microsoft. The TipRanks Stock Comparison tool indicates a 12% potential upside in MSFT with a $494 average price target. Nevertheless, Apple seems to be fairly priced at current levels.

Read full Disclosure

Get real-time notifications on news & analysis, curated for your stock watchlist. Download the TipRanks app today! Get the App