Apple 'Operating In An Alternative Universe,' Says Top Analyst, As Cupertino's Strategy Will Likely Weather Margin-Squeezing Effect Of AI Spending

Alphabet, Inc. GOOGL GOOG last week flagged higher capex spending as it battles to gain supremacy in the artificial intelligence arena, and nervy investors sold off the stock on worries concerning a potential margin contraction. A tech venture capitalist said on Monday that Apple Inc. AAPL could be fairly insulated because of the strategy it has chosen.

What Happened: Alphabet, Amazon, Inc. AMZN, Microsoft Corp. MSFT and Meta Platforms, Inc. META are on track to increase capex by about 43% this year, said Deepwater Asset Management’s Gene Munster in a post on X, formerly Twitter.

Apple is a standout among the mega-cap techs, he suggested. “In what seems like it's operating in an alternate universe, $AAPL's CapEx is expected to be down 9% this year as the company monetizes its distribution in exchange for OpenAI's models and infrastructure,” he said.

“This is one of the reasons why Apple should see record margins sometime in the middle of next year.” In the March quarter, the company reported gross margin of 46.6%.

See Also: Best Artificial Intelligence Stocks

Why It’s Important: Apple lagged behind its mega-cap tech peers in embracing AI. On Monday, Cupertino released a new software called Apple Intelligence in the developer beta of iOS 18.1 and the suite of AI features made available will help improve Siri, automatically generate emails and images and sort notifications.

The software is expected to be released to the public later this year but it may not be part of the iPhone 16 that will be launched this fall and will be powered by the iOS 18.

As Munster said, Apple announced in mid-June that it has forged a partnership with Sam Altman-led OpenAI to integrate ChatGPT into the iPhone, iPad and Mac. The arrangement reportedly does not require Apple to pay for the OpenAI association, with the latter making money through distribution.

Apple ended Monday’s session up 0.13% at $218.24, according to Benzinga Pro data.

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