Some Wall Street analysts and money managers anticipate a pathway to monetization for Apple’s latest artificial intelligence (AI) features despite encountering some initial rollout challenges. Earlier this month, Apple introduced its iPhone 16, featuring new AI capabilities branded as Apple Intelligence. Additionally, the company recently launched its iOS 18 operating system but stated that the AI tools will be available in a beta version later this fall. These innovations have also faced regulatory scrutiny in Europe and China.
Due to these obstacles, the anticipated significant upgrade cycle for Apple’s AI rollout has met with skepticism from some Wall Street analysts, who are questioning the potential monetization of the feature. Although incorporating Apple Intelligence as a paid tool isn’t currently the primary focus for investors, some analysts see a possibility of future additional costs.
Craig Moffett, co-founder of MoffettNathanson, discussed the potential of a paid AI add-on in a recent client note following Apple’s September event. He suggested that although Apple has not mentioned making Apple Intelligence a paid tool, offering it as a subscription-based digital assistant could significantly influence an iPhone upgrade cycle. However, he acknowledged that Apple is currently not prioritizing this “double monetization” approach, considering the unclear use cases and the product still being in beta. Apple, he noted, remains fundamentally a hardware company. Moffett’s interpretation of the complimentary inclusion of AI in iOS hints that Apple Intelligence may take some time to become a standalone revenue stream.
CFRA Research analyst Angelo Zino compared the setup for Apple Intelligence to the debut of Apple TV, which was initially offered for free through various packages. He also mentioned that Meta Platforms might be following a similar strategy by providing their large language model for free, with plans to monetize it over time as more users join and recognize its benefits. Zino anticipated Apple might increase the price of new iPhone models to offset the costs associated with the AI tools. Nonetheless, he flagged potential regulatory issues in China and Europe as factors that could hamper the upgrade cycle, possibly delaying any monetization plans for the AI features until the release of the iPhone 17.
Gene Munster, managing partner at Deepwater Asset Management, speculated that Apple could announce a premium integration with OpenAI’s GPT or Google’s Gemini for a fee to customers as early as next year. However, not all analysts believe that Apple will transform its AI tool into a paid service, even if it encourages some consumers to upgrade. John Belton of Gabelli Funds suggested that third-party developers might leverage Apple’s AI features to enhance their offerings, thereby accelerating Apple’s core business.
