Morgan Stanley Fund: Bullish on the AI terminal innovation cycle led by Apple in this round

According to the Zhitong Finance APP, Morgan Stanley Fund stated in a post that it is optimistic about the AI terminal innovation cycle led by Apple (AAPL.US) this round. In addition to the growth in terminal sales, it is expected that the use of terminals will bring huge demand for inference computing power, which is expected to further increase the demand for computing chips such as Nvidia (NVDA.US). At the same time, once AI is popularized on terminals, various software and model revenues will truly reach a larger audience and explode in the consumer market.

Morgan Stanley Fund pointed out that recent surveys targeting CIOs of large enterprises on the global IT spending trend show that the overall market is under pressure. CIOs expect IT budgets to grow by 4.1% in 2024, with growth expected to slow to 3.5% in 2025 (compared to 5.7% in a survey conducted a quarter ago). Interest in AI is increasing, but the timing of production is still delayed. The performance of SERVICENOW and IBM in the last two quarters has confirmed the characteristics of GenAI (Generative Artificial Intelligence) in the enterprise market.

Currently, AI applications are facing certain growth bottlenecks. A typical example is Kimi, with a daily active user base staying at the 1 million level, only 1/100 of ChatGPT, unable to break through further. It may take until the release of GPT-5 for a breakthrough. According to an interview by Dartmouth Engineering, Mira Murati, Chief Technology Officer of OpenAI, stated that the release of GPT-5 will be delayed until late 2025 or early 2026. The intelligence level of GPT-5 will achieve a qualitative leap, from GPT-3's child-like intelligence, to GPT-4's smart high school student, and then to GPT-5's "doctorate-level intelligence" on specific tasks.

However, AI terminals are the current innovation that can be driven by intelligence. The basic logic is that building an Agent workflow based on GPT3.5 performs even better than GPT4 itself. Agent represents a revolution in human-machine interaction, from touchscreens to voice, with smartphones and computers as hardware carriers. Therefore, terminals are entering an innovation cycle, and the next generation of the Internet may be an Agent Network.

Morgan Stanley Fund stated that Apple plans to start a new Siri test in January next year and release the official version in iOS 18.4. In addition, other features of Siri, such as new design and integration with ChatGPT, will be launched later this year. We believe that Apple's AI is expected to become a hit first, and its solution is expected to become mainstream for three main reasons: privacy protection, iOS 18 addresses user privacy concerns well through a three-tier architecture (local 3B model, private cloud model, third-party large model). Ecological closure hegemony. Historically, Apple has led the revolutions in graphical interfaces and touch interactions.

This round of AI smartphones is very similar to the 5G upgrade wave. A 1% upgrade rate is expected to boost Apple's sales by 6%, bring about a 1.8% increase in Apple's revenue, and further lead to the growth of Apple's App Store "Apple tax" and advertising revenue. Compared to the upgrade wave, the significance of Apple AI lies in the fact that GenAI is expected to penetrate into the daily lives of mainstream consumers for the first time. Apple AI is expected to bring Apple itself a billion-level increment. If there are 300-500 million users paying 10 yuan for AI monthly in 2025, it corresponds to nearly 5 billion yuan per month, while the existing 1.5 billion users correspond to 15 billion yuan per month, exceeding 100 billion yuan annually