AI is set to become a revenue-generating tool, and Morgan Stanley is optimistic about Apple.

Zhitong App learned that Apple (AAPL.US) has not expressed much opinion on its generative artificial intelligence (AI) program, but its CEO, Tim Cook, said that the tech giant has "invested a considerable amount of money" in it. Morgan Stanley said that this situation may change in 2024. The bank has given Apple a "buy" rating.

Morgan Stanley analyst Erik Woodring said that 2024 could be the "catalyst year" for edge AI, partly due to the improvement in computing and processing power, especially with the A17 Pro chip. Edge AI refers to AI work done on smartphones and personal computers, rather than solely in data centers. The A17 Pro can process 3.5 quadrillion operations per second, giving it enough capability to handle large language models with "billions of parameters."

Woodring said, "Considering Apple's unique data from over 2 billion devices and more than 1.2 billion users, Apple's focus on data privacy, and its leading advantage in hardware, software, chips, and vertical integration, we believe Apple will be one of the key winners in this competition, or 'edge AI enablers.'"

Therefore, Woodring said that integrating AI could be a "tailwind for years" for Apple, increasing the monetization level of its products and enhancing the long-term value of its user base.

Woodring mentioned that there are five ways for Apple to generate revenue from generative AI. The first is by increasing hardware share. He said that this somewhat vague idea is the "most likely outcome" as Apple could provide an "excellent" AI user experience, increasing iPhone shipments by 12 million and generating approximately $11 billion in revenue, with earnings per share between 13 and 19 cents.

Woodring said that in terms of services, Apple can benefit from new users, higher pricing, or new traffic acquisition agreements.

Woodring also mentioned that App Store purchases are another way for Apple to profit from generative AI, including commissions from ChatGPT and other generative AI applications. It has been reported that Apple has internally developed a chatbot similar to ChatGPT.

Lastly, Woodring suggested that Apple can leverage generative AI to launch a "premium" Siri subscription service.

Woodring said, "We estimate that if Apple charges $5 per month for Siri, with every 10% increase in iPhone installed base, it would add over $7 billion in high-margin service revenue annually, representing approximately 7% growth in services."

It has been reported that Siri is being upgraded to integrate large language models, allowing users to automatically complete complex tasks in ways that are currently not possible.Woodring believes that some investors question whether Apple takes artificial intelligence as seriously as other large tech companies like Google, Amazon, or Microsoft. However, all signs indicate that Apple will become a leader in the field of edge artificial intelligence, it's just a matter of "when" rather than "if".