The big stick of tariffs cannot suppress the wave of AI-driven technology replacement. Is Apple Inc. entering a climax of stock price rebound with the "fruit chain"?

With the temporary exemption of so-called "reciprocal tariffs" on core electronic products such as smartphones, personal computers, and high-performance server chips by the Trump administration, the sentiment of tech stock investors in the US has recently improved significantly. Market sentiment towards Apple and NVIDIA, two tech giants highly dependent on the global supply chain system, has surged, leading to a substantial increase in the stock prices of important companies in the "Apple outsourcing and supply chain" and "NVIDIA AI server outsourcing and supply chain". Recently, Trump stated that he has no intention of firing Federal Reserve Chairman Powell and has no intention of interfering with the independence of the Federal Reserve. After revealing plans to "substantially reduce" high tariffs on China, stocks and other risk assets have further rebounded. As of Wednesday's closing on the US stock market, stocks, bonds, and Treasury bonds all rose collectively, with the "Magnificent Seven" index of tech giants such as Apple and NVIDIA rising over 3%, and the Nasdaq 100 index, in which the "Magnificent Seven" have a high weighting, posting a cumulative rebound of over 5% in two days. Looking ahead to the future trend of global tech stocks, shares of core suppliers in the "Apple Chain" such as Apple iPhones are expected to follow the new round of consumer electronics upgrades driven by Apple Intelligence, as well as the continued rebound following the "pre-buying wave" caused by global consumers in response to Trump's establishment of tariffs in the semiconductor and other tech industries. Apple's valuation and fundamental expectations are expected to re-enter an upward trajectory driven by the new iPhone replacement cycle, pre-stocking of iPhones, Apple's strong closed-loop ecosystem, supply chain resilience, and strong bargaining power. Goldman Sachs recently released a research report stating that the new iPhone replacement cycle driven by Apple Intelligence, along with consumer concerns about tariff policies, has significantly strengthened the demand for Apple's consumer electronic products, leading to a logic of pre-strengthened replacement and the new iPhone and Mac sales channels driven by the M4 chip innovation could lead to stock building. Additionally, Apple's strong brand loyalty, continued product/module innovation, and significant growth in service business are expected to maintain a strong trend of performance growth. As a result, the Goldman analysis team expects earnings per share (EPS) for Apple's F2Q25 (ie the second quarter of Apple's 2025 fiscal year) to reach $1.64 (above Wall Street's average expectation of $1.61), with revenue expected to reach $95.4 billion (above average expectations of $94 billion). Goldman expects the second quarter performance of Apple's Q2 to be DRIVEN primarily by iPhone shipments up 10% year-on-year, benefiting from new products based on M4, and the expected significant impact of the iPad Air price increase strategy, with service business CAGR (compound annual growth rate) of at least 10% continuing to build Apple's ecosystem moat. Goldman's stock analyst team maintains a "buy" rating on Apple stock, with a target price of $256 within 12 months, which is slightly down from $259, implying a 25% potential increase in Apple's stock price in the next year. In terms of valuation, Goldman stated that Apple's valuation is attractive to global funds compared to historical valuation averages of Apple and other six tech giants. Goldman's outlook on Apple's Q2 performance: AI iPhone will drive EPS beyond expectations, focus on demand surge pre-linked to tariffs Goldman's research team stated that the robust growth of Apple's earnings is mainly due to: (1) the new replacement cycle driven by Apple Intelligence and the new products channel stocking of iPhone 16e, MacBook Air/Mac Studio/iPad based on M4 chip to meet the continuously strong demand beyond expectations; (2) the heavy pre-stocking of iPhone demand under tariff concerns to enhance the "strong replacement logic"; (3) the continuous upgrading of iPhone bundled promotions in the trend of intensified competition among US operators; (4) the continued strong performance of Apple's service business based on the strong Apple ecosystem. For iPhone, the largest revenue contributor to Apple's performance, Goldman expects Q2 iPhone revenue to be around $47.8 billion (up 4% year-on-year), higher than the average Wall Street expectation of $45.6 billion. Goldman stated that the increase in iPhone revenue is driven by a sales volume growth of 10% year-on-year, benefiting from the release of the more budget-friendly and non-flagship model iPhone 16e in fiscal year F2Q25, and the early concentration of demand due to the huge uncertainty of US tariff policies, as well as the AI-driven replacement cycle. Goldman's iPhone sales expectations are consistent with the market research firm IDC/Canalys (10% year-on-year growth) expectations. Secondly, Apple's service revenue is expected to increase by 11% year-on-year to $26.5 billion (compared to the Wall Street consensus estimate of $26.7 billion), benefiting from a 13% expected year-on-year increase in App Store billing and a total expected year-on-year increase of 44% in iCloud+, AppleCare+, Apple One subscriptions, and Apple Pay. Goldman expects Apple TV+F2Q25 revenue to reach $1.5 billion, with subscriptions possibly exceeding 60 million. Regarding the Mac business line, Goldman expects revenue of approximately $7.7 billion in F2Q25 (meaning a 3% year-on-year increase), with new M4 products expected to drive a significant 15% increase in overall Mac shipments. For Apple's iPad business line, Goldman's analysis team expects revenue of approximately $6.1 billion in F2Q25 (meaning a 9% year-on-year increase), with ASP expected to exceed expectations year-on-year.Rise by 5% (Premium strategy for 13-inch iPad Air)Goldman Sachs expects Apple's overall gross margin for the 2025 fiscal year to be 47.1% (compared to a consensus expectation of 47.1%), in the middle of the performance guidance range of 46.5%-47.5%. In addition, Apple management may announce new stock repurchase authorizations, which are expected to significantly boost market bullish sentiment towards Apple's stock price. Apple typically announces new buyback plans in the second fiscal quarter, for example, last year in the second fiscal quarter of the 2024 fiscal year, they announced a new buyback authorization of up to $110 billion. In terms of core controversies surrounding Apple's performance and future prospects, Goldman Sachs, after in-depth discussions with institutional investors and continuous market research, points out that the key points of contention about Apple's fundamental outlook are as follows: (1) The impact of tariffs may strike again. The tariff exemption for electronic products such as smartphones and PCs on April 11 will temporarily ease the tariff impact, but the U.S. Commerce Department's 232 semiconductor investigation may lead to new tariff policies targeting the semiconductor and technology sectors (if semiconductor tariffs are imposed, smartphones and PCs will inevitably be affected). It is reported that under Trump's authorization, the U.S. Commerce Department has initiated an investigation into the impact of imported drugs, semiconductors, smartphones, and other downstream products on national security in the United States. This is widely seen as a prelude to imposing tariffs on the global pharmaceutical and semiconductor industries, and could further escalate the global trade war initiated by the Trump administration. (2) Testing the resilience of demand. Against the backdrop of the risk of economic recession (Goldman Sachs predicts a 45% probability of a U.S. economic recession within the next 12 months), the specific demand growth process for a new round of upgrade cycles may not meet expectations. The potential folding screen smartphones, iPhone 17, and innovation in consumer electronics may form a dynamic balance with weak consumer spending in a recessionary environment. (3) Tail risks of anti-monopoly. The U.S. Department of Justice's antitrust case against Google may require significant adjustments to Google's TAC agreements with Apple. However, the Goldman analysis team still maintains their revenue forecasts related to TAC (CAGR of 10% from 2024 to 2029, reaching approximately $37.5 billion). In a monopoly ruling report, a U.S. judge pointed out that Google paid over $26 billion to tech companies like Apple to make its search engine the default search option on smartphones and web browsers, in violation of online search and online advertising markets, effectively blocking the path to success for any other competitors. Apple Intelligence-driven new upgrade cycle has just begun Goldman Sachs states that Apple's stock price has fallen by 20% since the beginning of 2025 (as of April 22, 2025), significantly underperforming the U.S. market benchmark S&P 500 index, which also dropped by 10% during the same period. The main reasons for this underperformance are concerns about margin and revenue growth due to intense competition in the Chinese market, as well as uncertainties brought by tariff policies. These factors have affected Apple due to its global supply chain layout. Although market sentiment has improved since the U.S. Commerce Department announced equal tariff exemptions for smartphones and personal computers on April 11 (Apple's stock rebounded by nearly 8% from April 4 to April 22), it is widely believed that uncertainty in tariff policies and performance growth prospects remain a sword hanging over the stock. The Goldman Sachs analysis team states that the new upgrade cycle driven by Apple Intelligence has quietly begun and is expected to drive Apple's performance into a significant growth trajectory since the second half of the year. Goldman Sachs expects that by mid-year, market sentiment may significantly improve, shifting the financial market's focus to the new generation of the iOS system to be released before the end of the year, as well as the more powerful "Apple Intelligence" features after updates and iterations. The iPhone 17 series to be released in the fall of 2025 is also expected to drive market bullish sentiment towards Apple's stock price and the entire "fruit chain". Integrating large AI models with consumer electronic terminals such as PCs and smartphones, creating large models with increasingly powerful inference performance that can run offline on local devices, while also being able to utilize vast cloud AI resources to tailor to users' deeper personal demands with "edge AI", has become the core content of AI planning blueprints for many global tech companies. In the imagined updates for Apple's Siri by Apple enthusiasts, with the combined power of cloud and edge AI large models, Siri's role may no longer be a clumsy formalized voice assistant. Through the integration of cloud AI resources and edge generative AI functions, Apple iPhone models are expected to achieve a more personalized "private AI assistant", similar to the "all-powerful AI companion" in the movie "HER". Apple has stated that the updated Siri voice assistant will be able to utilize user's personal information to answer questions and execute operations across various applications. Mark Gurman, a prominent Apple product leaker who has accurately revealed details about iPhone updates multiple times, recently stated that Apple is analyzing "customer device data" to improve its iPhone and other consumer electronics AI platforms - the Apple Intelligence AI module. This latest exclusive measure aims to protect user information security while helping the company catch up with AI smartphones and other edge AI devices, as well as competitors in the generative AI sector. Recently, many AI research teams have pointed out that over-reliance on synthetic data has significant flaws, such as instances where actual generative AI tools have misread notification information or failed to provide accurate text summaries. These are core influencing factors that have been criticized by some users since the launch of Apple's Apple Intelligence feature. In theory, by analyzing real-world data, Apple's Apple Intelligence AI module can potentially deliver more accurate and useful AI features to users, tailored to their individual needs and preferences.After rigorous validation and detailed verification, the new system is able to greatly enhance the overall performance of Apple Intelligence, making Apple Intelligence a strong competitor in the field of AI. It is worth noting that Apple's artificial intelligence team's generative AI products have long been lagging behind competitors in the AI smartphone market and in the field of large AI models such as OpenAI. Recently, Apple has even restructured the management team of its Siri voice assistant and related software business based on AI functionality.According to the smartphone survey data from AlphaWise, a research branch of another Wall Street giant, Morgan Stanley, Apple's new and advanced generation Siri digital assistant is widely seen by consumers as the "number one AI application" driving iPhone upgrades. The AlphaWise survey results show that "getting more advanced AI features" has entered the top five drives for smartphone upgrades for the first time. Among them, the "upgraded Siri digital assistant" is the most interested Apple Intelligence feature among the potential global iPhone 16 purchasing group, with importance exceeding other AI features such as image-related optimizations and ChatGPT integration. It is understood that Morgan Stanley released a report on Tuesday stating that Apple Intelligence features have been highly recognized by U.S. consumers. The latest AlphaWise research data shows that the acceptance of Apple Intelligence is "better than expected," with consumers showing a significant increase in awareness of its features and demonstrating a clear willingness to pay for it. Research data shows that in the past six months, nearly 80% of eligible U.S. iPhone users have downloaded and used Apple Intelligence features, with most users praising its ease of use, innovativeness, and significant improvement in user experience. The Morgan Stanley AlphaWise research report shows that on average, U.S. consumers are willing to pay $9.11 per month for unlimited use of Apple Intelligence, an 11% increase from the September 2024 research data. In addition, the survey also shows that close to 42% of the respondents consider it extremely or very important for the next generation of iPhones to have Apple Intelligence features, while among users who may switch to a new iPhone in the next 12 months, this proportion reaches 54%.