Apple's stock has been a strong performer, with a $1,000 investment 20 years ago now worth nearly $1.5 million. While growth from the iPhone has plateaued, the company is leveraging artificial intelligence and custom chip design to potentially drive future growth. IDC predicts a surge in generative AI-capable smartphone sales, and Apple is exploring the AI data center market, which is expected to grow significantly. Despite challenges, Apple remains a compelling investment opportunity.
There's no denying Apple (AAPL 0.36%) has been one of the market's most rewarding stocks of the modern era. A $10,000 investment in this popular tech giant 20 years ago would be worth nearly $2.5 million today. Credit the invention of the iPhone, mostly.
The argument that Apple's highest growth days are in the past, however, is a reasonable one. Neither the iPhone's revenue nor unit sales of the popular smartphone are growing, and it alone still accounts for about half of the company's top and bottom lines. Although its services arm is respectable, it's just not the growth driver that the iPhone was several years ago.
Maybe investors can find better opportunities than this one.
Before putting Apple back on the shelf to eventually be forgotten, though, you might want to take a deeper look at this company's foreseeable future. The tech giant's still got a few tricks up its sleeve that could help turn shareholders into millionaires.
AI to rekindle stagnant iPhone business
Don't misread the message. It's unlikely Apple stock will be able to catch another wave like the one it did beginning in 2007 when the very first iPhone was unveiled. The iPhone was a once-in-a-generation kind of product that will never be fully replaced as a profit center.
Even halving Apple shares' gain for the past 20 years over the course of the coming 20 years, however, would still make it a better performer than most other tickers are likely to be for that timeframe. The necessary growth drivers are certainly in place.
One of them is, of course, the advent of artificial intelligence.
While Apple was admittedly late to the AI party, it's made up for lost time with what's arguably a superior, easy-to-use solution. Its so-called Apple Intelligence puts powerful generative AI tools like summarizing emails, writing tools, and photo clean-up in users' hands, in addition to turning Siri into a full-blown digital assistant. Moreover, this intensive digital work is handled by the device itself rather than punting these duties to a cloud platform and then sending information back to the iPhone or iPad being used. This will certainly make it faster to use AI. It could also make it better, finally stoking investor interest in such tech that so far has been merely ho-hum.
And this needed demand will eventually materialize too... at least according to technology market research outfit IDC. It predicts that sales of generative-AI-capable smartphones will reach 234 million units this year, but explode to 912 million such mobile devices in 2028. Consumers simply need a little more time to see the value of these AI tools.
Sneaking into the data center chip business?
It's not just the consumer side of the artificial intelligence revolution that could power Apple stock for the foreseeable future, however. The company is also diving deeper into the chipmaking business.
Years ago, Apple was content to utilize readily available semiconductors for its hardware like Macs, then the iPhone, and then its iPad. As time has marched on, however, it's been able to request more customization of its silicon, most of which has been based on Arm Holdings' ARM processor architecture. Now -- with the benefit of doing so being clear -- the company's largely designing its own chips and hiring third-party manufacturers to make them according to specs.
That's not the curious part of the evolution, though. What's so noteworthy is how the company may intend to use these semiconductors. While certainly some of this underlying R&D is found within its latest iPhones and iPads, it's been hinted that Apple is actually designing processors for use in AI data centers, setting the stage for entry into waters it hasn't seemed all that interested in wading deeper into.
Apple itself has said little on the matter, so take the suggestion with a grain of salt. Of course, the company wouldn't say much, even if it was planning on becoming a major AI data center player. It would only confirm it when it was ready to fully launch.
This much can be said for sure though: If Apple wanted to dive all the way into the artificial intelligence data center industry, it's got the technological know-how to make a major splash. Or, it could do something adjacent to this business that might prove even more marketable, with less competition.
Whatever opportunity might be brewing, at stake is a piece of an AI data center market that research outfit Lucintel says is set to grow at an annualized pace of 22.5% between now and 2030.
Undoubtedly worth owning
Again, there will never be another iPhone, and therefore never another wave of revenue and earnings growth like the one it sparked for Apple. As the old adage goes, lightning never strikes the same place twice.
There's an underestimated opportunity ahead for current and prospective Apple shareholders, though. It's simply different than what drove this stock so much higher in the recent (and not so recent) past. Apple has evolved, and rightfully so. Indeed, in an environment where too many companies are either unwilling or unable to evolve, the fact that Apple can -- and is doing so -- bolsters the argument that it could help you reach the seven-figure savings mark.