Apple on Monday unveiled the AI-powered iPhone 16, but Wall Street is divided on whether it can reverse sluggish sales of the tech giant's flagship device.
The company's AI push, dubbed “Apple Intelligence,” was also at the forefront during a high-profile presentation at its headquarters in Cupertino, Calif. The latest models feature the A18 chip, designed to power large-scale generative models, a customizable “action button” that can be paired with various tasks like voice translation, and a new dedicated “camera control” button.
But the first AI software features won't be available in beta to iPhone users until next month, more than a week after the phone hits stores on September 20. Further updates are on the way, including an overhaul of the Siri voice assistant and a collaboration between Apple and ChatGPT. It is expected to continue early next year..
“Our next-generation iPhone is designed from the ground up for Apple Intelligence,” CEO Tim Cook said during the company's presentation. “This marks the beginning of an exciting new era.”
The base iPhone 16 model will cost $799, while the iPhone 16 Plus will be priced at a slightly higher $899. The more powerful iPhone 16 Pro and Pro Max models will start at $999 and $1,119, respectively. The smartphones will be available for preorder starting Friday, with the phones set to hit stores on September 20.
Apple is banking on AI as another part of its mobile phone upgrades after the company reported a 10% drop in iPhone sales year-over-year in its second-quarter earnings last May, the worst drop since the COVID-19 pandemic sparked a global economic slowdown.
Some of the much-talked-about AI features include enhanced writing tools that can rewrite and proofread posts, the ability to auto-generate email summaries, and the ability to create emojis and other animated images through written prompts.
Competition from smartphone rivals in China has been fierce, forcing Apple to resort to discounting some of its phones to spur demand. Ironically, Apple Intelligence will not initially be available in China or the European Union due to regulatory concerns.
Following the event, Apple's shares were down about 1% in midday trading on Monday.
To win over customers, Apple needs to convince the public that AI features in its smartphones are more than just a fad, according to Mark Bena, CEO and principal analyst at SmartTech Research.
“There may still be some resistance from consumers as privacy and confidentiality hurdles need to be overcome to fully realize the AI benefits in the new iPhones, but we feel momentum will build quickly because Apple has built historic brand trust with consumers,” Vena said.
Ben Bajarin, CEO and principal analyst at Creative Strategies, said the iPhone 16's AI enhancements “may help generate interest in the new lineup, but delays to some features may mean more people will wait to see them.”
“I think the jury is still out on whether this iPhone cycle will be able to drive a stronger than normal cycle,” Bajarin added, “but given that a large portion of the user base is using phones that are 3.5 years old or older, I think there's good reason to believe that an aging population and aggressive carrier promotions will cause a significant portion of that user base to upgrade.”
Wedbush analyst and known Apple bull Dan Ives said in a note that early supply chain data for the iPhone 16 indicates sales are “much stronger” than last year's model.
He estimated that initial shipments could exceed 90 million units, above Wall Street's expectations of 80 million to 84 million.
“We continue to see further indications across the Asian supply chain that this iPhone upgrade cycle could be historic, setting the stage for a super cycle. We now estimate that approximately 300 million iPhones worldwide have not been upgraded in over four years,” Ives said in a client note.
Ives rates the stock an “outperform” and sets a price target of $285 per share.
Along with the new iPhone models, the company also announced updated versions of the Apple Watch and AirPods.
The Apple Watch Series 10 will cost $399 and is touted as the thinnest version yet, with a larger screen and new features like sleep apnea detection, while the premium edition Apple Watch Ultra 2 will cost $799.
Designed to be more comfortable to wear than previous versions, the AirPods 4 start at $129, with the active noise cancelling version costing $179.
