Apple’s iPhone 16 Launch Is a Big Test for Consumer AI (Video)

Apple (AAPL) will host its annual iPhone launch event on Monday, September 9, at its headquarters in Cupertino, California.

CEO Tim Cook is expected to headline the keynote, which is expected to unveil the debut of the iPhone 16 series, the 10th anniversary edition of the Apple Watch and improved AirPods headphones.

That’s a lot of hardware, but Wall Street isn’t counting on new iPhones or special edition Apple Watches to drive the company’s stock price. Instead, all eyes will be on Apple’s generative AI-powered Apple Intelligence platform.

Apple Intelligence is the company’s big step toward bringing generative AI capabilities to iPhones, iPads, and Macs. Wall Street wasn’t particularly interested in how long it took Apple to announce its AI initiative, eagerly awaiting Microsoft (MSFT) and Google (GOOG, GOOGL) to debut their own AI services for businesses and consumers.

But investors changed their minds when Apple unveiled Apple Intelligence at its WWDC developer conference in June, sending its stock price up about 15% and allowing it to overtake Microsoft, Amazon, Tesla and Google in full-year results.

Apple is pitching Apple Intelligence as a key selling point for its latest phones, since its software will only run on last year’s iPhone 15 Pro or newer phones. Analysts are counting on this exclusivity to boost iPhone sales.

“Apple Intelligence remains key to unlocking pent-up iPhone demand and accelerating the replacement cycle, and we expect Apple’s event… to heavily highlight AI integration in the new iPhone 16,” Morgan Stanley analyst Erik Woodring wrote in a note to investors.

But Apple Intelligence could prove to be more than just a catalyst for iPhone sales. It will also be a defining moment for generative AI in the eyes of everyday consumers.

Apple’s AI Opportunity

Just look at Apple’s invite to the September 9 event to see that the company is going all-in on AI. From the “It’s Glowtime” tagline to the multi-colored Apple logo that’s meant to evoke Siri’s refreshed look, the company is sending the message that this show will be an AI show.

Apple is bringing AI to its software products with features that summarize text message threads, display priority emails in the Mail app, provide an improved Siri experience, and enable access to OpenAI’s ChatGPT.

Apple is also including AI staples like writing tools that help you spice up your emails and documents by proofreading or rewriting text to make it sound more professional or concise. The company also expects developers to jump on board the AI ​​train, creating new apps that leverage the technology via Apple devices.

“We estimate this could add $10 billion per year to Apple’s services margin once everything is up and running, and could be the start of a new, multi-track AI revenue stream that will be based on both hardware and software,” Wedbush analyst Dan Ives wrote in a note to investors.

“We believe that AI technology being introduced into the Apple ecosystem will drive monetization opportunities on both the services and iPhone/hardware fronts,” Ives added. And with that, $30-$40 per share incremental growth — taking the company’s market cap to $4 trillion.

Apple isn’t the only company introducing generative AI to its smartphone lineup. Samsung has its Galaxy AI software, which combines its own AI with some of Google’s AI intelligence. Google also offers its own Gemini AI platform via its new Pixel 9 lineup of devices, including the foldable Pixel 9 Pro Fold.

Apple, however, has done a much better job of explaining its AI offering than any of its competitors, making the software seem essential to users at its developer conference in June by explaining how it integrates with the company’s various apps and services in ways that Samsung and Google couldn’t, making the AI ​​feel more personal.

Risks of Artificial Intelligence

But Apple will have to do more to get people excited about its AI efforts. I’m using Apple’s beta software on my iPhone 15 Pro Max, and while I appreciate its ability to summarize long threads of text messages between friends — no one likes having to sift through 40 messages to find out what they’re making for dinner — and I find Mail’s priority email feature helpful, it’s hard to say whether it’s enough to get consumers excited about the technology.

Apple will also have to ensure that its AI (Apple Intelligence) is accurate and does not induce the hallucinations that have led to criticism of AI-based software such as Google’s AI Overview software, which famously told people to add pizza glue and eat rocks.

Above all, Apple will need to ensure that Apple Intelligence is a feature that consumers actually want to use, and not just something shoehorned in to appease investors worried that Apple won’t make it in time for the next wave of tech hype.

Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.

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