According to a recent note from Citi, Apple is poised to surpass Nvidia as the top AI stock in 2025. The bank predicts that the AI trade is shifting towards devices, which will benefit Apple's upcoming iPhone 16 cycle. This shift marks the third and final stage of the AI trade, following infrastructure stages that focused on chips, servers, networking, and storage.
Apple's AI push includes the upcoming release of the iPhone 16, which will feature A18 chips and new AI capabilities. The company is also planning to introduce AI features with the iPhone 17. Citi analyst Atif Malik believes that early feedback on iOS18 beta AI features, such as a new photo feature to remove unwanted objects, indicates strong potential for a significant upgrade cycle for the next-generation iPhones.
The iPhone 16 lineup is expected to be unveiled at a September 9 event called "It's Glowtime." The new devices will include on-device AI capabilities, A18 chips with an enhanced neural engine, improved cameras and microphones, and better battery life. These hardware upgrades are crucial for enabling a new generation of AI-capable software features.
While the iPhone 16 will mark the beginning of Apple's AI era, it is the release of the iPhone 17 in 2025 that is expected to drive a sales boom. Malik estimates that Apple will sell 85 million iPhone 16 units in 2024 and 92 million iPhone 17 units in 2025, leading to a total of 228 million iPhone units sold in 2024 and 241 million units sold in 2025.
Overall, Malik views Apple as being in a strong position to lead the adoption of AI technologies, given its premium market position and seamless integration of software and hardware. Malik rates Apple as a "Buy" with a $255 price target, representing a potential upside of 13% from Wednesday's closing price.