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Apple fails to impress Wall Street with its first bid in the AI race

Shares of the iPhone maker fell after it made a slate of announcements at WWDC

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Good morning! The Federal Reserve kicks off its two-day meeting today.

We’re due for big but unsurprising news tomorrow afternoon when policymakers are expected to announce no change to interest rates.

Stocks have started the week strong, but TBD on whether that momentum holds through CPI data and Jerome Powell’s press conference Wednesday.

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Apple (finally) joins the AI boom

Even the best of the best can fall short of expectations. 

Just look how Wall Street shrugged off Apple’s splashy AI announcements. 

In a keynote at the WWDC conference on Monday, Apple announced its push into the generative AI space with Apple Intelligence.

CEO Tim Cook showcased upcoming upgrades to Siri, cloud services, and integration with OpenAI’s ChatGPT, much of which onlookers and fans had anticipated. 

“We think Apple Intelligence is going to be indispensable to the products that already play such an integral role in our lives,” Cook said in his presentation. 

Still, the hubbub failed to generate buzz among investors.

Shares fell nearly 2% on the day — even as the S&P 500 and Nasdaq closed at fresh record highs. 

Wall Street may have been looking for some combination of more or better upgrades to the tech and business.

By the end of the day it turned into a “sell the news” event. 

For more than a year, retail and institutional investors have rallied around anything remotely tied to ChatGPT.

The iPhone maker is late to a trend investors can’t get enough of — one reason why the stock has traded flat this year. 

Meanwhile Nvidia, the biggest beneficiary of the AI boom, has gained 152%.

It’s not nothing that, just a week ago, it leapfrogged Apple in total market cap to become the second-most valuable public company in the US. 

For what it’s worth, on Apple’s big day, shares of Nvidia finished about 0.8% higher as it executed its 10-for-1 stock split.

Last year, Microsoft announced its OpenAI-powered AI tool, Copilot, and Google launched its Bard tool shortly after. Apple largely stayed mum through those debuts, which also helps explain the enormous hype leading up to Monday’s event.

To be sure, a few months of sideways trading for Apple doesn’t spell catastrophe for shareholders.

Apple has rewarded its long-term investors handsomely over the years. Most Wall Street strategists remain upbeat on the stock, independent of whether AI pans out.

Here’s what Wedbush analyst Dan Ives had to say after the event:

“Apple is taking the right path to implement AI across its ecosystem while laying out the foundation for the company’s multi-year AI strategy across the strongest installed base of 2.2 billion iOS devices over the coming years with the Street giving no credit for AAPL’s AI monetization.”

His optimism seems well placed. After all, it is hard to imagine a world where people stop using iPhones.

You’re probably reading this on one now. 

Do you think Apple can afford to be late to the AI trend, as far as its stock is concerned? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

*Data as of Monday, 7 p.m. ET

Elsewhere:

💸Markets expect a long time of higher-for-longer. Bond traders are looking for new clues this week on when interest rates could fall, but few expect a change. On Wednesday, the Fed will update its so-called dot plot, or quarterly economic projections. (Bloomberg)

🎮️Roaring Kitty hasn’t sold any GameStop. A post from his Reddit account showed the meme-stock trader still holds all his shares. The stock dropped 12% on Monday, bringing the value of his position about $51 million lower. (WSJ)

⚡️Tesla clears another hurdle in China. The EV producer secured a deal with Chinese tech giant Baidu to provide navigation services to use with Tesla’s self-driving system, called Autopilot. (CNN Business)

Rapid-fire:

  • Oil prices jumped Monday as Goldman Sachs forecasts a summer demand spike (CNBC)

  • Elon Musk says he would ban Apple devices if OpenAI tech is integrated into the operating system (Bloomberg)

  • Biotech firms are preparing for IPOs in a bullish sign for the US market (FT)

  • The New York Federal Reserve has seen a talent exodus under Fed President John Williams (Bloomberg)

  • JPMorgan upgraded Walmart from “neutral” to “overweight” as analysts raise their outlook for the retailer (Business Insider)

  • Trump floated tax-free tipping for hospitality and service workers (WSJ)

Last thing:

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