Apple’s introduction of its iPhone 16 with integrated artificial intelligence (AI) marks the tech giant’s deeper foray into the AI race, a move that UBS says sees as the ongoing structural support for the AI trend and the increasing competition within the sector.
“Without taking a view on individual companies, Apple’s foray into the AI race through its consumer AI services illustrates both ongoing structural support for the AI trend and the sector's increasingly competitive landscape,” UBS said.
While the product launch may not have significantly spiked Apple’s stock, UBS analysts view it as a signal of the broader, longer-term growth in AI-related capital expenditures across big tech companies.
UBS analysts noted that the strong capital spending on AI will continue, particularly as companies like Apple (NASDAQ:AAPL) ramp up their investments in AI-enabled devices and services. “We expect big tech’s capex on AI to grow 47% this year to USD 218 billion, and by another 16.5% in 2025 to USD 254 billion,” the firm noted.
The iPhone 16’s A18 chip, designed specifically to support generative AI, represents Apple’s latest bid to improve AI functionality while maintaining its privacy-focused approach. UBS sees this as part of a broader trend, with AI compute demand projected to grow strongly.
“New AI models could require 10-20 times more compute than current ones,” UBS said, pointing towards the increasing investment in graphics processing units (GPUs) and other AI infrastructure for growth prospects.
Moreover, UBS remains optimistic about the sector’s fundamentals. "Recent declines have been driven by broader economic uncertainty rather than weakening AI fundamentals," UBS stated.
The firm expects big tech’s earnings to grow near 15-20% over the next few quarters on the back of increasing AI monetization efforts. “We forecast big tech’s combined free cash flows to rise from $413 billion this year to USD 522 billion in 2025.