Apple Just Joined the AI Revolution. Investors Could Be in for a Windfall, According to Several Wall Street Analysts.

That long-awaited moment has arrived. After trailing many of its big tech rivals for years, Apple (NASDAQ:AAPL) has made a definitive move into artificial intelligence (AI). At the company's annual Worldwide Developers Conference (WWDC), the iPhone maker announced what users have been waiting for: Siri is finally getting an upgrade.

Apple unveiled Siri AI, which the company described as "an entirely new version of Siri, powered by Apple Intelligence." The virtual assistant is getting a long-rumored revamp that is designed to make Siri "a profoundly more capable and conversational assistant." The upgrade promises to make Siri "more helpful, more capable, and more intelligent."

It could also prove to be a windfall for investors. Here's why.

Image source: The Motley Fool.

An Apple a day...

Rather than reinvent the wheel, Apple joined forces with Nvidia and Alphabet's Google Cloud to kick-start its AI ambitions. The company's most advanced model, dubbed Apple Foundation Model Cloud Pro, will run on the Google Cloud Platform using Nvidia's Blackwell B200 graphics processing units (GPUs).

Apple joined forces with Google to use what it learned from the Gemini suite of AI models to develop the Apple Foundation Models that will power Apple Intelligence. These models will bridge the gap between the device and the cloud. For many user requests, Siri's AI will operate locally on the device. However, for more demanding requests that require agentic AI and complex reasoning, Apple's Private Cloud Compute will be extended to operate within Google Cloud.

Apple's approach differs from that of its rivals. The company added a tool to its iPhone operating system (iOS) -- the system orchestrator. This bit of software assesses the query, then routes it to the most appropriate model -- the on-device model or a cloud-based model.

In keeping with Apple's strict focus on privacy, the company is relying on recently developed Nvidia privacy technology, called "ambiguous confidential compute," a hardware-based system that encrypts the data being processed on the chips, preventing the host servers from accessing the data.

Wall Street is bullish

Wedbush analyst Dan Ives is particularly bullish on Apple's AI initiatives, with an outperform (buy) rating and a $400 price target -- the highest among his Wall Street colleagues. That represents potential gains for investors of 38% compared to Tuesday's closing price.

Ives called the developments "impressive," highlighting Apple's strategy of "integrating AI deep into everyday products." Furthermore, its installed base of 2.5 billion iOS users gives Apple a built-in target market for its offerings. Ives has crunched the numbers and believes that AI monetization and services will add between $75 and $100 to Apple's stock price. Furthermore, he concludes that these advances are not baked into the stock's current multiple.

Morgan Stanley analyst Eric Woodring also weighed in, maintaining an outperform (buy) rating on the stock while increasing his base price target to $360 and his bull target to $440, or 51% potential upside. He said this event "has the chance to reframe Apple as an AI winner."

Now what?

Apple has largely been left out of the conversation when it comes to AI, but if we've learned anything from the company's long track record, it's that you underestimate Apple at your own peril. The company has proven time and again that you simply can't count out the iPhone maker.

In 2018, Apple became the first U.S. company to attain a $1 trillion market cap, and many on Wall Street threw in the towel, concluding that the stock had peaked. Indeed, at that time, roughly half of the analysts covering the stock rated it a hold or a sell.

We know how that turned out. Apple went on to become the first publicly traded company to reach market caps of $2 trillion and $3 trillion, respectively.

That's why I believe Apple is an unequivocal buy.

Danny Vena, CPA has positions in Alphabet, Apple, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.