Zinger Key Points
- If Apple can reach an agreement with Google or OpenAI, it could add incremental hardware features in 2025.
- “It remains unclear if Apple will choose to leverage a cloud-based model," says analyst.
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Apple Inc AAPL is in active discussions with Alphabet Inc GOOG GOOGL for building Google's Gemini AI engine into the iPhone.
If Apple can reach an agreement with Google or OpenAI, it could add incremental hardware features in 2025, according to BofA Securities.
The Apple Analyst: Wamsi Mohan maintained a Buy rating and price target of $225 for Apple.
The Apple Thesis: Al could drive a “multi-year upgrade cycle” and allow the company to improve gross margins going ahead, Mohan said in the note.
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“It remains unclear if Apple will choose to leverage a cloud-based model that could potentially have higher latency vs. on device option,” the analyst wrote. “We view incremental on-device functions especially in 2025,” he added.
Given Apple's installed base of 2.2 billion, a licensing deal based on usage volumes could become a huge cost, while a fixed license for cloud-based usage would not be economically viable for partners, Mohan stated.
He further mentioned that Apply could go ahead with an on-device fixed charge per device pricing, “to speed up time to market, while continuing to develop in-house technologies.”
AAPL Price Action: Shares of Apple had risen by 1.61% to $175.41 at the time of publication on Monday.
Read Next: Apple Is Sending Alphabet Stock Higher Monday: What's Going On?
Photo: Andy Wang via Unsplash
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