Apple's AI could usher in a historic upgrade cycle that investors are overlooking

MW Apple's AI could usher in a historic upgrade cycle that investors are overlooking

By Christine Ji

Apple's new AI features are on track to be monetized faster than expected, thanks to increased hardware requirements and new 'killer apps,' analyst says

Apple's new Siri assistant will require at least 12 gigabytes of unified memory to run.

Apple shares were down 3% Tuesday following the company's WWDC keynote, reversing a pre-event rally that briefly sent the stock to record highs.

The latest artificial-intelligence updates unveiled by the company weren't enough to satisfy investors. But the negative market reaction is missing a massive opportunity looming on the horizon, according to Morgan Stanley analyst Erik Woodring.

Apple's $(AAPL)$ revamped Siri could trigger a major upgrade cycle as users ditch their old iPhones for more powerful hardware, Woodring wrote in a Tuesday note. He maintained his overweight rating and increased his price target to $360 from $330. That's nearly 20% upside from Monday's closing price of $301.54.

The new AI-powered Siri understands on-device context as well as general world knowledge, functioning like a chatbot that can find files, draft messages and answer queries. Siri also comes with visual intelligence that allows it to see on-screen content and real-world surroundings. Morgan Stanley estimated that 1.3 billion iPhones in circulation don't have the necessary hardware to run the updated Siri. Approximately 850 million iPhones can't run Apple Intelligence at all. The main constraint is memory, as the AI-powered Siri will require at least 12 gigabytes of unified memory to support advanced queries.

This sets the stage for a massive hardware upgrade cycle and an earlier-than-expected monetization opportunity. "With less backwards compatibility and clearer use cases, we see WWDC as a net positive," Woodring wrote.

More: Apple's WWDC will be a make-or-break moment for the company's fledgling AI strategy

Beyond Siri, Apple's Image Playground and Image Editing "are clear 'killer apps' that appear miles improved" from previous versions, according to Woodring. Users can now generate images using natural language. They can also use the "Clean Up" tool and spatial reframing capabilities to fix up pictures even if they were a bit too late to capture the perfect shot.

"We were especially impressed with the photo editing tools, which we expect will be heavily trafficked, and which are Apple's clearest near-term Services monetization opportunity," Woodring wrote. These features are only available for limited usage on current iPhones due to computing constraints, which will provide Apple with a powerful new monetization lever.

"Image generation, photo editing and app intents will all be impacted by rate limits, forcing upgrades to iCloud (and potentially new iCloud tiers/pricing) as soon as this fall," Woodring wrote. He said the new Apple Intelligence features could drive over 10% services growth and midteens product growth in 2027.

-Christine Ji

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June 09, 2026 12:08 ET (16:08 GMT)

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