Apple’s AI Awakening: Is Google’s Gemini the Spark AAPL Stock Needs?

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Apple (NASDAQ:AAPL) stock might not be the worst-performing Magnificent Seven name this year, but its year-to-date 7.5% decline is still disappointing. AAPL closed at a record high of $197.96 on Dec. 13, marking its best gain since the pandemic. Declining iPhone sales in China and lack of growth catalysts weigh on AAPL stock.

The Vision Pro headset is its first new product introduction in years but can’t appeal to a wide enough audience for the price. The Apple car was scrapped and the tech giant is woefully behind on artificial intelligence. Investors doubt AAPL stock’s potential to surpass $200 per share. Let’s take a look and find out.

AAPL Stock and AI

Apple got a little bit of a jolt the other day when Bloomberg reported the next iteration of the iPhone would come with Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google Gemini AI interface built in.

Gemini, of course, is the AI engine that got caught up in controversy as soon as it was released. Google pulled the content because of racial bias and is worked on correcting the errors.

Many expect the kerfuffle will be a short-lived controversy for Google. Yet it was an unnecessary forced error because it was late in bringing an AI tool to market sooner. The incident also set Google back in trying to catch up to the competition.

Despite the bounce AAPL stock received, farming out its AI development instead of building it in-house disappointed investors. Although Microsoft (NASDAQ:MSFT) successfully did the same by integrating OpenAI‘s ChatGPT into all of its products and services, more is expected from Apple because of its tech prowess.

Yet this wouldn’t be the first partnership between Apple and Google. The latter pays Apple some $26 billion a year to be the default search engine on the Safari browser, but the partnership is mired in legal controversy. A lawsuit scheduled to finish sometime this spring.

Problems Keep Piling Up

That’s not the only litigation Apple needs to worry about. The European Union hit the tech stock with a $2 billion fine for violating rules about prohibiting purchases outside of the App Store.

Apple just agreed to a $490 million settlement of a class-action lawsuit. It alleged CEO Tim Cook misled investors over sales growth estimates in China in 2018. Worse, the Justice Deptartment filed an antitrust lawsuit against the company.

iPhone sales plunged 24% in the first six weeks of 2024, according to data reported by The Wall Street Journal. At the same time, sales of Chinese rival Huawei‘s Mate 60 smartphone series surged 64%. So dire is the situation, Cook flew to Shanghai to rally workers and smooth over relations.

There’s no indication the trip will help. Sales in China have been weak for years. Yet with the country representing 19% of total sales, or $72.5 billion, Apple can’t take it lightly.

Rays of Hope

One ray of sunshine for Apple that broke through the clouds was Walmart (NYSE:WMT) selling Mac computers for the first time.

The MacBook Air laptop with the M1 chip is available on Walmart’s website and will soon be available in select stores. It will carry a $699 price tag. It’s a slightly older MacBook, though. The latest iteration comes with the M3 chip and sells for just under $1,100.

Still, that’s not going to move the needle, particularly with the doom drums beating in the background. But the critics ignore the ongoing strength of Apple’s services division. Segment revenue reached a record $23 billion in the first quarter and $85.2 billion for all of fiscal 2023. It remains Apple’s biggest growth driver.

It may look like gray skies at the moment and AAPL stock might not scale any walls soon. Yet I wouldn’t rule out a $200 or better share price sometime within the next year.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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