Citi Analysts Name Apple as Their Top AI Pick for 2025

Citi analysts announced on Thursday that they have ranked Apple stock as their “top AI pick” going into 2025, surpassing Nvidia (NASDAQ:NVDA) and Arista Networks (NYSE:ANET).

This decision comes ahead of Apple Inc’s (NASDAQ:AAPL) upcoming product event, “It’s Glowtime,” on September 9th, where the company is expected to unveil its iPhone 16 lineup.

Anticipated Updates

At the event, Apple is likely to announce several key updates:
– A18 Chips using N3E process, featuring an enhanced neural engine
– Improved camera and microphone features
– Upgraded modem for Pro models

Citi analysts noted, “Apple’s September event is generally all about hardware updates, but we believe the company will emphasize how the iPhone 16 hardware can support its upcoming Apple Intelligence features, expected to roll out officially later in the fall.”

Future Plans

The analysts also predict a significant refresh with the iPhone 17 next year, suggesting that AI features will be gradually introduced to allow time for developers to create apps and users to become familiar with them.

Citi projects that iPhone 16 and iPhone 17 unit sales in 2024 and 2025 will reach 85 million and 92 million, respectively, with total iPhone units expected to be 228 million in 2024 and 241 million in 2025.

Stock Performance and CFO Transition

According to Citi, AAPL stock has outperformed the broader market by an average of 5%-6% from June-Q earnings into the September iPhone release since 2016. They are also comfortable with Apple’s recent CFO transition, viewing it as a planned succession.

Developer Feedback and AI Features

Developer feedback on the iOS 18 beta AI features, including an object removal photo tool, suggests that AI will be a compelling addition for next year’s iPhone refresh, analysts mentioned.

Google Antitrust Case

Regarding the Google (NASDAQ:GOOGL) vs. DOJ antitrust case, Citi stated that while predicting the outcome is challenging, it believes the implications are already priced in, considering the Safari browser a valuable asset. Recent reports indicate that Google lost its antitrust case against the DOJ concerning monopoly practices in search and text advertising, affecting exclusive search deals with Android and Apple.

Interestingly, Google reportedly pays Apple approximately 36% of its search revenue, which amounts to about $20 billion in 2022, representing around 5% of Apple’s total revenue and 17% of its operating profit.