Apple, Tech Giants 'About To Get Dwarfed By Generative AI,' Analyst Warns

Data, in today's world, is as valuable as gold, and Generative AI is using this wealth to forge innovations that were previously unimaginable.

With the rise of Generative AI, giants like Apple Inc (NASDAQ: AAPL) could be overshadowed, as new entrants harness the power of large language models (LLMs) to redefine industries, Needham & Company said Thursday.

Here’s what you need to know.

The AAPL Analyst: Needham analyst Laura Martin reiterated a Buy rating on Apple with a $195 price target.

The AAPL Takeaways: Apple and fellow tech giants face a monumental shift in the industry, with generative AI poised to introduce novel products and reduce costs, potentially sidelining traditional tech powerhouses.

"Many of these companies (including AAPL) are about to get dwarfed by generative AI, in our view," Martin said in a note to investors.

Economic systems will play a pivotal role in shaping the AI adoption trajectory, the Needham analyst said. In staunch capitalist environments, laggards in adopting generative AI might find themselves edged out in a few years, she added.

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The arena of media and internet is particularly poised for an overhaul, thanks to generative AI. While it's early days to pinpoint the potential underperformers, entities controlling LLMs are emerging as clear frontrunners, Martin noted.

Needham said Amazon.com, Inc (NASDAQ: AMZN) Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), and Microsoft Corp (NASDAQ: MSFT) are the clear standouts so far.

But, procuring data for the LLMs is seeing an uptick in costs, the analyst said, hinting that future LLMs might come with heftier price tags.

The crux of generative AI's power is anchored in the quality and contextuality of data within the LLM, which underscores the role of data in turbocharging AI's capability, be it in birthing avant-garde products or trimming overheads.

Apple's narrative here is nuanced — while it might remain on the fringes of the generative AI surge, its fortress-like ecosystem could act as a bulwark against major setbacks. However, Needham’s spotlight is on Android, bolstered by Google's arsenal spanning cloud computing, generative AI, and a trove of first-party global consumer data, poised to possibly eclipse Apple in the race.

The analyst said instead of spreading bets thin on potential laggards, hedge on the assured winners — the tech arsenal providers including Amazon's AWS, Microsoft's OpenAI, and Google Cloud.

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