Apple spent big on AI and with iPhone 16 it’s paying off, analyst says

Christine Short, Head of Research at Wall Street Horizon, spoke with Quartz for the latest installment of our “Smart Investing” video series.

Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.

ANDY MILLS (AM): On Monday, Apple announced a slew of new product updates, including the first iPhone built from the ground up using Apple Intelligence. Are there any tools you’re seeing in what Apple (AAPL) shared that you’re most excited about?

Christine Short (CS): Yeah, the iPhone 16, the new AirPods using hearing aid technology. It was interesting because typically after a big product launch like that, the stock has either flattened out or gone down. It doesn’t necessarily shoot up. And we actually saw investors really happy about the new product line. It wasn’t just changes to the camera or new colors. There were some meaningful changes in products that could lead Apple forward and they’ve been doing quite well this year. They’ve remained firm when some of the other tech companies have been all over the place. But I think it’s a good prospect for Apple going to the second half of the year here.

AM: On the surface, they’re doing a good job at incorporating the power of AI into the products that they currently have. Do you see it materially changing their bottom line?

CS: They’re investing a lot of money so that’s gonna come out of that. But look, these products seem to excite investors. Let’s see if they excite the consumer, as we just talked about, the consumer feels pretty strapped now. These are not cheap items. They’re on the higher end. These phones are over a thousand dollars and so is it gonna be enough to have people upgrade? Are they gonna upgrade from what they currently have? The National Retail Federation does this back-to-school survey and it showed that folks bought less electronics heading into this school year because they kind of bought them all last year. And so that was sort of the big cycle of product upgrades. And will this be enough for people to upgrade again just a year later? I’m not sure if it’s going to move the needle just because of how shaky the consumer is, but we’ll see. There are those people that are early adopters and want to have everything new and I think, again, the investor reaction to it was quite positive because they tend to be sort of muted after these product launches.

AM: Did you see anything in their presentation that seemed like kind of a whiff to you?

CS: No, I mean I’ve thought that in the past for sure. Like I said, sometimes there’s just really no notable updates. But this seems like one of the more exciting ones that I’ve watched in a while and I think it was because of that incorporation of AI. There were some health benefits in there. There were just different things than we’ve seen before. So I think they really stepped it up yesterday.

AM: They’ve got a whole bunch of new products that will be for sale in time for the holiday season. Do you see this affecting their earnings for Q4?

CS: Yeah, look, I think the consumer still remains kind of murky. We’re not sure if people are going to shell out for those higher cost products. I do think they were very interesting. I think it certainly puts them in a better position than prior to announcing those products yesterday. However, let’s see what happens with next month’s retail sales. July was very high for retail sales. We saw 1% growth that was the highest since January of 2023. So it shows there are, you know, a certain sec of consumers that are still willing to spend, they’re willing to put it on their credit card, they’re willing to take it out of savings. And so I think that bodes well for Apple going into the holiday shopping season.

AM: Really interesting. Thank you, Christine.