Apple's Artificial Intelligence (AI) Has Started This 'Gorgeous Jigsaw' Stock on a Roll

Tech stocks are off to a nice start in 2024-as of this writing, theNasdaq Resonance-100Index (Nasdaq-100The index has risen by 5% during the year.Apple Inc. (NASDAQ resonance code: AAPL)But failed to maintain the strong momentum of last year. As a member of the so-called "seven giants" in the mega-cap technology stocks, so far this year has fallen more than 10%.

Apple, by contrast, did pretty well last year, up about 48%. Its reversal of fortune can be attributed to its slowing sales growth and lack of significant artificial intelligence (AI) development.Meta Platforms,Ying Wei reach(Nvidia(math.) andMicrosoft(Microsoft corporation) and other "Big 7" companies have outperformed the tech industry as a whole this year, as their AI-focused efforts are paying off.

The thing is, Apple's decline could present a buying opportunity for savvy investors, as the company is well-positioned to capitalize on two key growth opportunities related to artificial intelligence.

Artificial Intelligence Could Drive Solid Growth for Apple's Two Businesses

In the first quarter of fiscal year 2024, which ended December 30, 2023, Apple's revenue grew only 21 TP3T year-over-year to $119.6 billion. Apple sold $69.7 billion worth of iPhones in the quarter, a year-over-year increase of 61 TP3T, while MacBook sales were essentially flat at $7.8 billion.

Analysts don't expect Apple to grow too fast throughout fiscal 2024. According to the consensus estimate, the company's revenue will grow by only 11 TP3T to $356.6 billion. Earnings growth is expected to be slightly better than expected, at 7%, or $6.04 per share. However, the use of artificial intelligence in the personal computer (PC) and smartphone markets may help Apple achieve stronger-than-expected growth.

Apple is preparing to revamp its Mac lineup with a new family of AI processors, according to a Bloomberg article. The new MacBooks, which are expected to feature the company's own M4 processor, are expected to hit the market by the end of 2024, with more M4 processor-powered computers to follow in 2025.

Bloomberg notes that Apple expects to offer three models of M4 processors to suit different budgets. The company also expects to allow customers to install more memory on these new computers, which is not surprising considering rumors that Apple plans to highlight artificial intelligence features on its upcoming M4 processor-powered MacBooks.

Apple declined to comment on the Bloomberg report, which is hardly surprising. However, the company's launch of AI-enabled PCs isn't surprising either, as the market is set to grow strongly. Market research firm Canalys estimates that 48 million AI PCs will be shipped by 2024, accounting for 181 TP3T of the overall PC market, and by 2028, it expects AI-enabled PCs to account for 701 TP3T of the overall shipments, or 205 million, for an annual growth rate of 441 TP3T.

According to IDC, Apple will have a market share of 8.41 TP3T in 2023, making it the fourth-largest PC maker, and it shipped 21.7 million MacBooks, down 221 TP3T from the previous year. It shipped 21.7 million MacBooks, down 22% from the previous year, and since the market for AI-enabled PCs is currently in the early stages of growth, Apple would be wise to enter the space quickly to capitalize on the fast-growing demand. The good news for Apple investors is that analysts expect AI will also help drive a big jump in the company's iPhone sales.

JP Morgan Chase (bank)Samik Chatterjee, of the company's Sami Konrad Chatterjee, argues that artificial intelligence could lead to a strong iPhone upgrade cycle, just as it did nearly four years ago when the company launched the 5G iPhone. At the time, Apple's sales and earnings were growing at a healthy rate, but the company was finding it hard to keep up with demand for these smartphones. Analysts at JPMorgan Chase predict that Apple could integrate artificial intelligence features into the iPhones it releases later this year. That would also present a solid long-term growth opportunity: Counterpoint Research predicts that 1 billion AI smartphones will be shipped between 2024 and 2027.

Daniel Ives of Wedbush Securities estimates that 240 million iPhones will be in the promotion window by the end of 2023. Apple shipped 226 million iPhones last year, so the company could see a big boost in sales as artificial intelligence not only helps it attract new users, but also encourages existing installations to buy new iPhones.

The stock's valuation means investors are getting a good deal right now.

Apple currently trades at a price-to-earnings ratio of 26 times, which is lower than the 30 times of the Nasdaq-100, a commonly used benchmark index for the tech sector. It might be wise to buy the stock at that valuation, as the potential improvement in the company's growth from artificial intelligence could help it beat Wall Street's expectations.

Notably, the 44 analysts covering the stock have a median 12-month price target of $200, which implies a jump of 161 TP3T from where it was before, and the stock has a maximum price target of $250, with a potential upside of 451 TP3T, which is why investors looking for potential AI winners should consider taking advantage of the Applebee's correction.

Should you invest $1,000 in Apple now?

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Randi Zuckerberg, former Facebook Market Development Arbitrator and Spokeswoman, and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the Board of Directors of The Motley Fool. JPMorgan Chase is an advertising name partner of The Ascent, a Motley Fool company. Harsh Chauhan does not own any of the stocks mentioned above. The Motley Fool recommends Apple, JPMorgan Chase, Meta Platforms, Microsoft, and Nvidia as its holdings. The Motley Fool recommends the following options: Microsoft January 2026 $395 Calls Long and Microsoft January 2026 $405 Calls Short. The Motley Fool has a disclosure policy.

Apple: this beaten-down 'Big 7' stock could start to soar on artificial intelligence (AI) was originally published by The Motley Fool.