Apple’s AI could usher in a historic upgrade cycle, and Wall Street is missing it – Morgan Stanley

Following Apple’s WWDC keynote, shares dipped as investors seemed underwhelmed by the new AI announcements, including an upgraded Siri. However, Morgan Stanley analyst Erik Woodring argues the market is missing the bigger picture: Apple’s AI requires significantly more powerful hardware (such as at least 12GB of unified memory), leaving roughly 1.3 billion existing iPhones unable to run the full suite of features.

This hardware gap, combined with emerging “killer apps,” is poised to accelerate upgrades and faster monetization than expected—potentially reframing Apple as a clear AI winner and driving substantial upside for the stock.

The latest artificial-intelligence updates unveiled by the company weren’t enough to satisfy investors. But the negative market reaction is missing a massive opportunity looming on the horizon, according to Morgan Stanley analyst Erik Woodring.

Christine Ji for MarketWatch:
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Apple’s revamped Siri could trigger a major upgrade cycle as users ditch their old iPhones for more powerful hardware, Woodring wrote in a Tuesday note. He maintained his overweight rating and increased his price target to $360 from $330.

Morgan Stanley estimated that 1.3 billion iPhones in circulation don’t have the necessary hardware to run the updated Siri. Approximately 850 million iPhones can’t run Apple Intelligence at all. The main constraint is memory, as the AI-powered Siri will require at least 12 gigabytes of unified memory to support advanced queries.

This sets the stage for a massive hardware upgrade cycle and an earlier-than-expected monetization opportunity. “With less backwards compatibility and clearer use cases, we see WWDC as a net positive,” Woodring wrote.

Beyond Siri, Apple’s Image Playground and Image Editing “are clear ‘killer apps’ that appear miles improved” from previous versions, according to Woodring. Users can now generate images using natural language. They can also use the “Clean Up” tool and spatial reframing capabilities to fix up pictures even if they were a bit too late to capture the perfect shot.

“We were especially impressed with the photo editing tools, which we expect will be heavily trafficked, and which are Apple’s clearest near-term Services monetization opportunity,” Woodring wrote. These features are only available for limited usage on current iPhones due to computing constraints, which will provide Apple with a powerful new monetization lever.

“Image generation, photo editing and app intents will all be impacted by rate limits, forcing upgrades to iCloud (and potentially new iCloud tiers/pricing) as soon as this fall,” Woodring wrote. He said the new Apple Intelligence features could drive over 10% services growth and mid-teens product growth in 2027.

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Yup.

Apple has begun to monetize Apple Intelligence. This will be a very good thing for iCloud+ subscribers, Apple, and – when the market finally figures it out – AAPL investors. – MacDailyNews, June 9, 2026

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