Apple Could Lose Its Title as Most Valuable Company, Analyst Says. Here’s Why.

“Generative AI will redefine the basis of competition for media and internet companies,” Martin says. “It’s hard to pick losers today, because it’s very early. However, we believe that clear winners are the arms dealers that house large language models (LLMs).”

In Martin’s thesis, Apple is the relative loser because it doesn’t have its own business offering access to LLMs via a cloud-computing platform. Even if Apple were to enter the AI space, Martin says it would likely lose out due to the first-mover advantage gained by current leaders. She says late entrants are “doomed” because AI customers will find it costly to change providers and the rising costs of data to create future models. 

“Not only do [Microsoft, Amazon, and Google’s] LLMs have the lowest cost structures and first-mover advantages, but their average lifetime value per Cloud customer is about to skyrocket owing to the stickiness of apps built on their LLMs,” Martin writes. 

Martin doesn’t say Apple will be an absolute loser. But, Apple won’t grow at the same rate as its rivals, she says. In her view, the iPhone maker can successfully defend its own ecosystem of more than two billion devices. She’s also a proponent of Apple buying
Walt Disney
(DIS) to build its content business.

Needham rates Apple a Buy and has a $195 target price. Shares recently traded around $180. Apple couldn’t immediately be reached for comment.

When questioned about Apple’s AI ambitions, CEO Tim Cook has said the company is investing in the technology and embedding it in its products but has generally shied away from public pronouncements about its goals.

Martin didn’t specify a timeline for when Amazon, Alphabet, and Microsoft will surpass Apple, but says the AI-driven revolution in the media and internet sectors is likely to play out over the next 10 years, driving costs down by 20% to 30% and raising revenue due to improved content production. 

Write to Adam Clark at [email protected]