On CNBC’s “Closing Bell Overtime,” Dan Ives, Wedbush‘s global head of technology research, shared his insights on Apple’s recent performance and its potential path to a $5 trillion market cap, primarily driven by an anticipated AI upgrade cycle. Ives recently raised his price target for Apple (AAPL) to a Street-High of $325 from $300, maintaining an ‘Outperform’ rating on the shares, attributing his optimism to recent channel checks indicating a robust holiday season, projecting Apple to sell 240 million iPhones this year.
Despite Apple’s stock trading at high multiples compared to its earnings, Ives dismissed concerns about overvaluation. He argued that Apple’s services business alone could justify a $2 trillion valuation, and with AI integration, revenue could increase significantly, potentially adding $5 to $10 billion annually. This, combined with what he believes will be an underestimated growth in iPhone sales, could push Apple’s valuation far beyond current expectations.
Ives addressed concerns about consumer behavior amidst inflation, noting that while it might affect upgrades marginally, the real driver for upgrades is the vast number of iPhones—300 million out of 1.5 billion globally—that haven’t been upgraded in over four years. He emphasized that Apple Intelligence, part of the iOS 18.2 update, would catalyze this cycle, with hundreds of new AI-driven apps expected to enhance the iPhone ecosystem.
Responding to comparisons with the lukewarm reception to AI PCs by companies like HP (HPE) and Dell (DELL), Ives highlighted the unique upgrade cycle for smartphones, which typically occurs every 2.5 to 3 years but has now extended to 4 years, creating pent-up demand. He believes that the integration of AI will not only drive iPhone upgrades but also extend across Apple’s entire product line, including iPads and Macs, marking the beginning of a multi-year AI-driven upgrade super cycle.
Ives concluded that the current market cap of Apple, around $3.92 trillion, does not reflect the potential growth from AI monetization. He predicts that as AI penetration in Apple’s ecosystem grows from 15% to 25-30%, the company could feasibly reach a $5 trillion valuation within the next 12 to 18 months. His vision is for Apple to lead the consumer AI revolution, countering any skepticism with a firm belief in Apple’s strategic position and future growth trajectory.
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