Could Agentic AI Be Apple's Next Big Tailwind?

Artificial intelligence (AI) helped many tech leaders improve their businesses. Nvidia saw surging demand for its GPUs (Graphics Processing Units), Meta Platforms used the technology to increase engagement on its apps through algorithms, and the hyperscalers -- Amazon, Alphabet, and Microsoft -- launched a variety of AI services they offer through the cloud. Meanwhile, many thought that Apple (AAPL 0.20%) was lagging its similarly sized tech peers in capitalizing on AI, but as the industry shifts toward agentic AI -- or systems that can autonomously plan and execute tasks -- could it become a tailwind for Apple?

Image source: The Motley Fool.

Analysts are waking up

Wall Street is starting to recognize Apple's potential in the AI industry, with several analysts expressing bullish sentiment. For instance, Wamsi Mohan, an analyst at Bank of America, recently increased his price target for the stock to $380, up from $330. The reason: Apple could be a winner of the shift to agentic AI. Mohan thinks that the iPhone maker could generate between $15 billion and $30 billion in AI-related revenue by the fiscal year 2030. Note that this is not that much revenue by Apple's standards, which generates over $400 billion in annual sales. However, provided agentic AI reaches the heights some expect -- Nvidia's CEO Jensen Huang predicted we will eventually have billions of AI agents -- it could be just the beginning for Apple.

Slow and steady wins the race

It's worth noting that Apple isn't typically the first to market with new technologies. The company takes its time, keeps things close to the vest, and finds ways to introduce its own spin on existing tech to generate significant excitement and make plenty of money. There is a long list of Apple products that demonstrate this trend. For instance, Apple did not create earphones, but its AirPods introduced an innovative twist on the established model and became highly popular.

Even Apple's most famous product, the iPhone, is an example, and perhaps the best. Smartphones existed before Apple launched the first generation of its iPhone, but the company's device was a reinvention that proved highly popular and a veritable trendsetter. We can still see the results of that revolution today, as Apple's iPhone segment remains the largest by revenue.

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Could the company do the same with AI? My view is that it can. Apple has already made progress in this quest. Its latest iPhone, the 17, is driving a solid renewal cycle, partly thanks to various AI-powered features. Apple reported the best top-line growth rate it has had in over three years in its most recent quarter (after also doing the same in the previous quarter), thanks to the iPhone 17.

AAPL Revenue (Quarterly YoY Growth) data by YCharts

Also, Apple has a significant advantage that can help it capitalize on AI. The company has a large installed base with more than two billion devices in circulation. This factor can help in several ways. First, it allows Apple to reach a vast number of customers quickly by leveraging its large network of existing users upon launching new AI features. Second, it can improve its switching costs, especially for customers who own multiple devices, if certain AI features work only on Apple devices (including some that allow two or more of them to sync), creating a powerful incentive not to switch.

Third, Apple can access significant data on how its customers use its AI services, allowing it to make tweaks and improvements as needed. In other words, it can help boost the company's network effects. All these advantages could help the company capitalize on agentic AI.

Is Apple stock a buy?

Apple is currently near its all-time high. But some investors will point out that it still faces obstacles, including tariffs and regulatory scrutiny. Even with those caveats, my view is that Apple remains an outstanding long-term bet, and not just because of its AI work that could eventually pay rich dividends. Two of Apple's greatest strengths are its deep ecosystem and strong customer loyalty. These grant the company a wide moat and umpteen monetization opportunities.

Further, Apple continues to ramp up its high-margin services segment, which will eventually help boost its profits as it accounts for a larger share of revenue. And lastly, Apple is a solid dividend stock that has raised its payouts by 89.5% over the past decade. All these reasons (and more) highlight why Apple stock is a buy.