Apple GPT, AI-Siri, VisionPro's Global Rollout: What To Expect At WWDC 2024

Apple Inc. AAPL is set to unveil significant advancements at its annual Worldwide Developers Conference (WWDC) from June 10-14, 2024, with a highly anticipated keynote on June 10.

The tech giant is expected to spotlight new AI-powered features across its core applications, along with updates to its operating systems, according to a recent note by Goldman Sachs analyst Michael Ng.

AI Integration Across Apple Ecosystem

Goldman Sachs anticipates Apple’s AI strategy will focus on embedding generative AI tools within its core applications like Safari, Photos, and Notes, providing practical tools for users through a blend of on-device and cloud processing.

Ng stated, “We expect Apple's AI strategy to be focused on embedding generative AI tools within its core applications to provide practical tools for users.”

The upcoming iOS 18, traditionally announced at WWDC and released in mid-to-late September, is poised to be a cornerstone of Apple’s AI integration.

Ng noted that the update will likely include features such as summarizing audio recordings, predictive text for messaging, AI-powered photo and video editing, spam responding, live translation, more natural interactions with Siri, and AI-generated music playlists. Additional updates may include RCS support for Messages and more flexible home screen design options.

New AI-powered capabilities are likely to be integrated into Siri and other apps, enhancing functionalities such as photo retouching, voice memo transcription, and suggested replies to emails and messages.

While many of these new features will be processed on-device using the iPhone's chipset, more computationally intensive tasks, such as those leveraging large language models (LLMs), will be offloaded to data centers.

As revealed by Bloomberg in late May, Apple will showcase “a different approach to artificial intelligence, focusing on tools that ordinary consumers can use in their daily lives.”

While Apple’s first wave of modern AI features might not be as advanced as those from competitors, the company believes its extensive customer base will give it a significant edge.

Apple GPT Set To Compete Against OpenAI’s ChatGPT, Google’s Gemini

Goldman Sachs believes that Apple will try to leverage its own Apple GPT, which, although smaller than competitors, will be adequate for tasks like suggested replies and AI-Siri.

However, Apple’s LLM is not yet competitive with leading models like Chat GPT-4 or Gemini, and thus Tim Cook will continue to maintain partnership with a third-party LLM.

“Apple is giving access to its 1.2 bn active iPhone users. Our base case is that Apple likely pays for the computing costs related to a third-party LLM with the potential to recoup some of these costs through some sort of premium features embedded into Apple One,” Goldman Sachs said.

Vision Pro Global Rollout

While no new Mac product announcements are expected at WWDC 2024, Apple is likely to announce the international rollout of its Vision Pro headset. Since its U.S. launch in February 2024, the Vision Pro has seen growing interest.

Media reports suggest Apple is preparing for its initial global rollout in countries including Mainland China, South Korea, Japan, Hong Kong, Singapore, Canada, Australia, the UK, France, and Germany.

Notably, the Vision Pro has recently received 3C certification in China, positioning it ahead of competitors like Meta's Quest headsets, which are not yet available in the Chinese market.

Goldman Sachs Sees Apple Shifting To A Service-Oriented Tech Giant

Goldman Sachs maintains a “Buy” rating on Apple with a 12-month target price of $226, representing a 17.6% upside from current levels. This valuation is based on a 30X multiple of their next 12 months plus one year earnings-per-share (EPS) estimate.

Ng emphasized that Apple's valuation is attractive relative to its historical multiple and compared to key tech peers.

The majority of Apple’s gross profit growth over the next five years is expected to come from Services, marking a significant shift in the company’s investment narrative.

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