Artificial-intelligence models may be the tech product everyone wants, but how those models are distributed to consumers is what counts.
That's where Apple is winning.
The company's potential to dominate how AI is consumed is why Rothschild & Co Redburn analyst Timm Schulze-Melander upgraded Apple stock to a Buy from Neutral on Monday. The analyst set a price target of $400, up from the previous $260.
Apple stock declined 0.4% to $304.59 on Monday. The firm's new price target represents 31% upside from current trading levels.
Shares have advanced 12% this year and have gained 32% over the past 12 months. The stock, however, is down 10% from its record of $340.08 on July 28.
For many on Wall Street, the iPhone maker has become the "anti-AI" trade by virtue of its decision to keep its AI spending in check compared with Alphabet, Microsoft, Amazon.com, and Meta Platforms.
While this strategy is good for the balance sheet, analysts have noted the company's Apple Intelligence product has been a disappointment and has been far less capable than offerings from peers.
This has raised concerns Apple has fallen behind in the AI race.
"Investors have been concerned that AI may disrupt Apple's flywheel of premium devices tightly integrated with rapidly expanding services, which has weighed on Apple's valuation multiple in 2025 and into 2026," Schulze-Melander wrote.
Apple has so far remedied its AI model shortcomings by partnering with Alphabet-owned Google. Apple Intelligence now relies on Google Gemini and runs on Nvidia chips in the Google cloud.
"This is serendipitous, since Apple eschewed the huge AI investments of those battling for AI model leadership. Now, building on imported capabilities, a fine-tuned suite of agentic services within the Apple ecosystem appears more likely to impress the customer," Schulze-Melander wrote.
While the threat of falling behind in the AI model race has been real for Apple, the iPhone maker could now be poised to become the "gatekeeper of consumer AI." This could be achieved if Apple partners with Nvidia for access to open-source AI models to reduce dependence on Google, Schulze-Melander wrote.
The key to all of this, of course, is the iPhone and Apple's 2.55 billion installed base of devices. Schulze-Melander expects iPhone sales to continue to be healthy over the next five years and that the upcoming foldable phone will likely boost sales and revenue.
Schulze-Melander sees Apple selling 14 million foldable iPhones in fiscal 2027, with only about a 2% impact on traditional iPhones from a cannibalization effect.
"Apple Intelligence is best understood as a demand-and-retention lever for the iPhone hardware cycle and services flywheel," Schulze-Melander wrote. "Together, these are the earnings engine that Apple is built on."
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