Apple's AI Stumble? What WWDC Really Means for AAPL Stock | theStreet Pro's Chris Versace

Hey everyone, it is Julie here with TipRanks. Once again, I have the pleasure of being joined by Chris Versace from The Street Pro. And today, we are diving into Apple and what's been going on since their WWDC. So, Chris, thank you so much for joining me today. >> Happy to do it as always. You know, I look forward to these conversations. >> I appreciate it. Now, we're going to start off with your biggest takeaway from the WWDC or the Worldwide Developers Conference. So, what was the most important announcement that investors should care about? And also, why did the stock start selling off since Siri took center stage? >> Great question. So, you know, did the event showcase what some folks were, you know, waiting to hear more about a revamped Apple Intelligence Siri AI? Did they show how folks could use both to, you know, do greater productivity across their apps on their iPhone, iPad, Mac, or, you know, any other Apple device? Yeah, they did all that. But, I I think, Julie, the real issue here, the culprit, is that we've been using, you know, ChatGPT, Anthropic, Perplexity, Google Gemini. And I I think that the there just wasn't enough wow factor delivered by Apple. Also, the fact that they kind of started the keynote off with some things that folks were like, why are we even talking about this stuff? So, I my my overall takeaway is, you know, from the keynote itself, >> Eh. Little underwhelming, it sounds like. Um, and when we talk about this the the delayed Siri overhaul, so they had delayed that from the WWC from 2024. So, investors have been waiting 2 years. And so, you know, you did mention in your recent analysis that the announcement didn't dazzle. So, what specifically was missing that the market was potentially hoping to see? >> I I think that when Apple does these things, well, first off, they they really approached the the entire keynote very differently than what they tend to do in the past where they tend to you know call out specific improvements in each software platform. They didn't do that. And I I think what they were trying to do understandably is show wow after all this time here it is, right? Renewed Apple intelligence and Siri I yay. And I I really do think that this is more the beginning. You know there were several things along the way that kind of said you know more to come. So I you know I I I think it's a good first step. It just wasn't that big wow factor that people tend to expect leading into not just this WWDC but really any WWDC. And and typically there's a lot of chatter about what may happen what could be. People get very excited the stock runs up and unfortunately more often than not we tend to see it pull back. And I think that's exactly what we're seeing this time around. >> And the other issue is that there are some usage limits tied to their iCloud plus subscriptions and their Siri AI won't be available in the EU or China due to regulatory requirements. So how much do those restrictions matter to the broader Apple intelligence growth story? >> Well I think they certainly took some wind out of any sale that Apple was hoping to get. But here's the thing. If you've used some of these models like I I have used um uh Anthropic. There have been times I'm kind of you know getting a little heavy into what I'm doing and then it says oh sorry my friend you have hit your daily limit. You have to wait until this time tomorrow. So it's not uncommon right? And we know that there's a tremendous amount of uh compute behind these models so more people using them the more compute is needed. That's why we're long the chips that we are in the pro portfolio but that's a that that's another story. So kind of tying in another revenue stream for Apple uh a la the iCloud plus subscription uh pretty smart I have to say. But you can see where some people might be put off in the beginning. I thought this was free. I bought my iPhone. So I I think it until we see signs that this is a really compelling um feature, if you will. Um I I think we might see some hesitancy out of the gate. And you are right, the growth story is going to be limited because it's not just the Eurozone, it's also China where these updates will not be present when Apple at least initially releases its next uh software set of black ones. >> Yeah, definitely big markets there to be missing out on. Now, we've mentioned some of these other AI platforms. So Apple is clearly trying to play a bit of catch-up with OpenAI, with Gemini, with Anthropic there. How do you think they're doing with this or where they falling a bit short? >> So, you know, typically Apple leads with a very um easy use uh delightful customer experience. And I I think candidly this is one of the hard parts coming out of this because, you know, some of the features aren't available right away. It's going to be released in beta. You know, I there there's going to be some additional tweaking going on. So I I I do think that once we get into the second, third beta releases between now and, you know, what's typically late September, early October, um I I think there might be some new enthusiasm around this because on the one hand you would say, "Wow, to have Siri AI integrate across multiple apps on my device speaking to me and giving me information, helping me do whatever it is I want to do." Boy, wouldn't that be nice as opposed to just sitting there typing at your keyboard, "Hey ChatGPT, here's a question, you know, what's the what's the answer?" Or create this, here's the output. By and large you still need to do something with it. So I I'm cautiously optimistic. >> All right. And then another criticism that we are largely hearing is that a lot of the existing iPhones won't actually be able to fully run the newest AI features. So, how much of a challenge is that going to be for that Apple upgrade cycle? >> So, I think that's again, if Apple can as we go through the beta releases and it really, you know, gets a lot of mojo going, if you will, about these new products and services, I think you could actually see that be good for the upgrade cycle. But it it has to deliver the wow that it didn't deliver at WWDC to get the user base excited and say, "I need to have that. Therefore, I need to get a new iPhone or iPad or Mac, whatever it might be." >> Yeah. Now, I mean, speaking of the cycle upgrade there, they have historically been a very much product story here with the iPhones and devices. Now, are they becoming more of an AI story? Is the market still primarily focused on the iPhone demand versus the services growth? >> Well, first and foremost, iPhone is the company's biggest business. So, of course, we have to pay, you know, extremely close attention to it. A faster upgrade cycle would be fantastic for revenue, profits, and the bottom line, no question. But don't underestimate the power of the services business because of the margin profile that it has, it's also not as seasonal as the iPhone business or the rest of the hardware business tends to be. So, I I think that, you know, Apple, again, using iCloud iCloud Plus and some other things, it's smart, but it needs to deliver that wow factor first Julie. >> Now, to to sum it all up here in the bottom line, after this WWDC, how has your view on the Apple stock changed at all? Are you more bullish, more cautious, largely unchanged? >> I would say unchanged. You know, we were coming into the the event, we were saying that, "Boy, Apple really needs to delight uh users with the experience, really showcase um Apple intelligence and Siri AI. And it it's some of that, but not enough to deliver that pop, that wow. Which is why I think you said I was not uh dazzled yesterday. And I wasn't. I I really wasn't. But but I think the again, as I said a few minutes ago, as we get more use cases out there and you know, the internet, you know, kind of starts talking about what can be done, what can't be done, what the refinements are, I think we'll get that uh over time. So, I haven't really changed. Um still not a buyer here. At lower levels, that's where the pro portfolio might look to scoop up some additional shares. >> Is there a price you're targeting for that lower level? >> Uh there is, as a matter of fact. Oh, was that a question, Julie? I'm sorry. Um I would say I So, the stock's around like 280. I I would say that we would start to get really interested around that, you know, 270-ish level. But again, you know, that that those levels can change depending on other dynamics in the marketplace. Uh for example, um I if this comes out, you know, today, tomorrow, we will get the May revenue report from Taiwan Semiconductor. Those figures could, you know, sway what we're thinking. Um but we'll have to see. >> All right, we'll have to keep an eye on that. And as it closes out, I want to take a quick pivot here cuz tomorrow we have a CPI report. >> Oh yes. >> What are we watching most closely there in that inflation data? >> Well, so I I would say this to you. It's not just tomorrow, it's tomorrow and Thursday. Because tomorrow is the CPI and the expectation is that headline CPI is going to be up Let me get my notes here, Julie. 4.2% year-over-year is the consensus. For context, that was up from 3.8% the month before, 3.3%, 2.4%. So, you I I think the market is kind of expecting a big step up 4.2 from 3.8. Uh but the other number to watch is the producer price index. And that'll be out on Thursday. There, whoo, the market's expecting 6.4% on a year-over-year basis up from 6% 4.3 3.4 from the months prior. And And the reason I think you have to focus in on both is um two reasons. One, the commentary that we've been getting out of the monthly ISM PMI reports, again, that's manufacturers, is that they continue to face higher input prices. There are some issues as well with um supply chain disruptions and they're trying to pass through more price increases. That shows up in the PPI. There is a lag between the PPI and the CPI. So, to the extent that the PPI continues to truck higher, the odds of the CPI moving higher are that much greater. But here's the thing. We've already seen expectations for rate cuts wiped off the board this year. And if you're in the camp with Goldman Sachs, you won't see the next rate cut until sometime in the middle of 2027. So, if we get a slightly weaker than expected, still up but weaker than expected, print, that could be positive for the markets tomorrow. >> If it does come in hotter than expected, are certain areas of the market that you think would be a bit more vulnerable to that? >> Uh housing, without a doubt. And you know, we we've been concerned about the creep up that we've seen in housing, the impact on mortgage rates, and how that just makes buying a new home that much more expensive. And, you know, that is really um helped us stay away from the housing sector. So, I I think that's probably the biggest one to be mindful of. As well as other interest rate sensitive uh sectors. >> All right, sure. All right, well, as always, very valuable insights there, Chris. Thank you so much. We have a lot to keep an eye on this week, and we'll see you back here in a couple weeks to talk next. >> Awesome. Looking forward to it.