Apple's strategy of spending way less on artificial intelligence than its peers is starting to turn heads.
HSBC analyst Nicolas Cote-Colisson upgraded Apple to a Buy from Hold on Friday and raised his price target on the stock to $366 from $260. The firm added that a "blue sky scenario" indicates a further $31 upside.
A big reason for the upgrade was Apple move to abstain from the AI spending frenzy. Barron's wrote this week that Apple is using a Standard Oil-like strategy when it comes to the AI race, letting its Big Tech peers pony up for research and development and then is ready to swoop in to grab the best models when the dust settles.
"The innovation gap between Apple and rivals, that we see as largely attributable to its delay in the AI race, appears finally set to close," Cote-Colison wrote.
HSBC's upgrade comes a day after Apple gained 1.8% to $333.26, notching its second straight record close. The firm's $366 price target represents about 10% gain from the stock Thursday's close.
Apple stock declined 0.1% to $332.95 on Friday. Apple has climbed around 15% so far this month and 23% so far this year, beating the S&P 500's year-to-date gain of 9.4%.
Cote-Colison noted that Apple is staying out of the high AI capital spending debate, investing 2.5% of its estimated 2026 sales compared with 39% from the big hyperscalers.
"Thus far, we had retained a cautious approach on Apple with a Hold rating," the analyst wrote. "We had preferred other segments of the AI value chain, more prompt to exploit the bottlenecks created by the high demand in computing power, including hyperscalers or memory makers."
Now, things are changing, as the firm sees an "operational turning point" for Apple in the AI age, as the iPhone maker is poised to leverage its 2.5 billion installed device base with its coming revamped Apple Intelligence.
HSBC sees several catalysts for Apple stock -- including the new agentic Siri AI and upcoming iPhone models.
"Siri AI will come with visual intelligence, can access information across apps for context-aware conversations, and richer interactions," Cote-Colison wrote.
The firm noted that Apple's AI is now based on Alphabet's Gemini models and that it is a sign of broader large-language-model integration.
This means that Apple is ready to roll out better AI features just in time for many new hardware releases, which "could trigger a strong renewal cycle for users of iPhone series 15 and 16," according to HSBC.
"This AI boost comes at the right moment, when we think Apple has one of its most innovative product pipelines in place," Cote-Colison wrote.
On this basis, HSBC raised its Apple 2027 products and services revenue estimates by 7% and 5.4%, respectively.
However fiscal third-quarter earnings on July 30 will serve as a key test for Apple, and investors will have to wait and see if the good times will keep rolling.
Write to Kit Norton at kit.norton@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 17, 2026 11:45 ET (15:45 GMT)
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