Apple shares fell last Monday (16 September) after warnings that demand for the firm’s new iPhone 16 Pro model has been unexpectedly tepid, say Matt Turner and Subrat Patnaik on Bloomberg. Last week’s launch event was deemed “underwhelming” and one analyst has noted that pre-order sales since then are down 13% from last year’s iPhone 15 launch. This would be a major disappointment for shareholders: Apple’s shares have perked up since May “as investors bet that Apple’s artificial intelligence (AI) features will boost sales of its latest line of iPhones”.
The idea is that those buying the latest iPhone will be able to access AI-based features that will be rolled out starting in October, says The Economist. But producing compelling features “will not be easy”. AI relies on large language models (LLMs) that are trained with graphics processing units (GPUs).
These “use so much energy it can take a nuclear power plant to fuel them”. They also “need huge amounts of memory and unfathomable quantities of data”, which “can cost hundreds of millions of dollars”. What’s more, even after these models are created, running them is “expensive”, with even slimmed-down versions still using “oodles” of computational power that will quickly drain a device’s batteries.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Will Apple shares get a boost from AI?
Whether the technology is there or not, it’s not surprising that Apple is turning to AI given that past improvements to the iPhone have helped drive sales, says Robert Cyran on Breakingviews. For example, the iPhone 6’s bigger screen helped propel sales upward by 50% in 2015.
But with the smartphone market “mature” and most new developments “incremental”, customers now only buy a new handset if they need to replace one. As a result, analysts are forecasting a mere 7.5% rise in iPhone revenue over the next year. Nonetheless, the success or failure of this new phone “will offer one of the first peeks into AI’s financial reality”.
23 Sep 2024: Article updated to reflect the date of Apple's iPhone 16 launch and the subsequent market reaction.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Family face £100k stamp duty bill after avoidance scheme crashes in court – the mistakes to avoidA couple faces a substantial stamp duty bill after trying to reduce the amount they owed
-
How to get a guaranteed income in retirementSavers want certainty in retirement, with almost two-fifths naming guaranteed income as their main priority. An annuity can achieve this – but what other income options are available to supplement it?
-
'The rise and fall of Kodak is a lesson for the tech giants'Opinion The long decline of Kodak – a once-dominant company – shows why no business is safe from disruption, says Matthew Lynn
-
The most likely outcome of the AI boom is a big fallOpinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
What we can learn from Britain’s "Dashing Dozen" stocksStocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?
-
The rise of Robin Zeng: China’s billionaire battery kingRobin Zeng, a pioneer in EV batteries, is vying with Li Ka-shing for the title of Hong Kong’s richest person. He is typical of a new kind of tycoon in China
-
Europe’s forgotten equities offer value, growth and strong cash flowsOpinion Jonathon Regis, co-portfolio manager, Developed Markets UCITS Strategy, Lansdowne Partners, highlights forgotten equities he'd put his money in
-
How retail investors can gain exposure to Lloyd’s of LondonIt’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure
-
The flaw in Terry Smith’s strategy at FundsmithOpinion Fundsmith has invested in some excellent companies, but it has struggled to decide when to sell, says Max King
-
The goal of business is not profit, but virtueOpinion Serve your customers well, and the profits will follow, according to a new book. It rarely works the other way around, says Stuart Watkins
