Apple: Latest AI Innovations Could Trigger iPhone Supercycle, According to Evercore ISI

Apple's latest research suggests that the company is on the cusp of becoming a leader in the field of artificial intelligence (AI). According to Evercore ISI analysts, overcoming the challenges of local data processing, known as on-device inference, could pave the way for a new iPhone boom. In this context, Evercore ISI analyst Daryanani reiterates his bullish view on Apple by issuing a Buy recommendation with an Overweight rating and a target price of $220.

The study published on 04-01-2024 presents Apple's latest language processing model, called Reference Resolution As Language Modeling (ReALM). It was found that the more compact versions of ReALM are similar in performance to OpenAI's GPT-4, but with less complexity. As a result, such models could enable AI functionalities directly on end devices such as smartphones and PCs, similar to what was previously only possible in large data centers.

Evercore ISI analyst Amit Daryanani emphasizes that the breakthrough in Apple's technology lies in the improved reference resolution. This means that the AI can refer to data that occurs directly on the screen or in the context of a conversation. Apple greatly simplifies this process by converting all data on the screen into text, which is easier for language models to process than pictorial data. This is key to Apple's ability to deliver high performance with less effort.

Deploying AI tools directly to devices could reduce response times, increase security and make AI app development easier and cheaper, Daryanani said.

He believes Apple's AI strategy is particularly focused on local processing of large language models to significantly improve the user experience on iPhone, Mac and iPad. Thanks to its own chip technology and vertical integration, Apple is in a unique position to further secure the iOS ecosystem and drive a faster hardware renewal cycle, provided the innovations are considered significant.

According to Daryanani, this refresh cycle could be driven by significant hardware improvements, including optimization of the neural processor or graphics processing unit (GPU). A significant increase in device capabilities could also increase average selling prices.

Apple is about to kick off its annual developer conference on June 10, where many exciting AI news are expected.

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