Apple rises over 3%, hits first record this year on hopes AI will fuel upgrades

Apple Inc. shares hit their first intraday record since December on Tuesday, as investor sentiment around the iPhone maker continues to improve.

Shares rose as much as 3.5% to $199.87. The stock has risen more than 20% off an April low, a rally that has added more than $500 billion to its market capitalization and returned it above a $3 trillion market cap.

The record came in the wake of the company’s annual Worldwide Developers Conference, where it showcased a number of features related to artificial intelligence and announced a partnership with ChatGPT maker OpenAI. The event crystallized a strategy many investors felt had been missing from Apple amid AI-fueled rallies elsewhere within Big Tech.

Apple’s AI event fueled hopes that customers will pay up for the next generation of iPhones, and D.A. Davidson upgraded the stock to buy from neutral on this thesis.

The AI functions “could lead to a much-needed iPhone upgrade cycle,” wrote analyst Gil Luria. “Apple has not only the consumer’s information, but also their trust, it can deliver the above deeply integrated functionality in a way that standalone chat applications, PCs, and Android devices may not be able to fully replicate.”

Such a cycle would represent the kind of growth catalyst investors have been longing for.

Concerns about the company’s growth were eased by a positive quarterly report in early May, when Apple also announced the largest stock buyback program in US history at $110 billion.

That report has also supported the stock in recent weeks — May was the best month for Apple shares since July 2022 — but despite the record share price, Apple is only up 3.7% this year. It lags behind the Nasdaq 100 Index’s 13% gain, while stocks with more concrete AI exposure — including Microsoft Corp, Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc. — have all posted double-digit gains. AI-focused chipmaker Nvidia Corp. has soared 146%, briefly overtaking Apple in size.

Among the so-called Magnificent Seven, only Tesla Inc. has done worse than Apple this year. The electric-vehicle maker has dropped more than 30% this year.