Investors started to do the math on Apple's AI news: Deepwater's Munster on delayed stock boost

But is Apple's AI driven surge happening a little bit too fast or is all the excitement justified? Joining us now is Deepwater Asset Management managing partner Gene Munster. It was weird. They came out with the announcement. It was like this big yawn. The stock actually went down. Everyone's complaining about the privacy aspect. Then the next day, Apple soared because everybody loves AI. What a swing. Yeah, definitely. It was a remarkable swing. You talked about the market cap size of it. And I think ultimately what investors did between this inevitable sell on the news and the next morning is just kind of start to do the math about what this means. And at the most basic level, the question that they asked was do these features, will these features be enough to compel people to upgrade? And investors resounding response of course was yes, stock up about 8% on the week based on that. And so we did was pretty rare to see that kind of reversal, especially given the size of the company. But I think it really speaks to a vote of confidence that investors have related to how these products are going to drive upgrade cycle in 25 and 26. So I'm going to quote Gene Munster back to Gene Munster because Gene looking at this, this is, this is I think the thesis of your bullish take on Apple, which is that Apple effectively is getting ChatGPT for free because ChatGPT, which is owned by open AI, now gets to be exposed to every single person that has an iPhone or buys an iPhone with it on. And even more so, Apple is being paid because we pay for the phone. So Apple's not paying for AI and we're paying Apple. It's like a, it's like the deal of the century. It sounds like there they are absolutely threading the needle and in that respect. And so the a lot of the, the power that they have or the unique aspect, of course, is in their small language model that runs on device. They have a small private cloud, but most of it's going to be on device. And as you said, Brian, consumers are going to be paying Apple for that. They're going to be basically paying for the hardware to do the inference, which is just remarkable when you think about the hundreds of billions of dollars that's being spent with different chips and, and big hyperscalers. So Apple is able to and get a lot of the intelligence from free, as you said, from, from open AI. And so this is a situation I just mentioned the revenue piece. And what it ultimately comes down to is that they're going to grow probably at 10% next year. The streets looking for five, probably 1214% and 26, the streets looking for around 5-6 percent. But the piece that I think investors aren't grasping right now is that what you just described is that margins are likely going up. And I think we're going to see record margins. It probably won't be till 2025. And the the last kind of golden opportunity here related to Apple is that all this stuff is on the come. It's all about 25 and 26. So if there's an ugly June quarter, an ugly September quarter this year, the stock's just going to probably cruise right through it because that guidepost, that target of next year isn't going to change. I'm going to ask you a question you may not know the answer to Gene, so I apologize if you don't because I've been, I've been curious and I should probably, you know, use the Internet to see if anybody else knows this too. Is there going to be a way to turn this off or delete this from your iPhone or Android phone? If you just, if you are worried, there's a lot of people that do worry about privacy. What exactly are they scraping? I'd like to learn more. So let's say I get a new phone or upgrade the iOS and it's on there. Is this something that we can delete if we want to? So when it comes to the more advanced model, of course, with open AI, you know, you can just opt out of that. When it comes to what features are powered by AI, I don't know the answer. If you can turn them on, off, my sense is you will be able to toggle them on and off. Yeah, if it's built, I think if it's built into the architecture, right, built into the underlying operating system, iOS 17 or whatever it may be, you probably can't is you can't. Well, I think you actually could because they, if it's built into the software, they could put that menu on there. But there's one question out here, Brian, why would you want to turn them off? I don't know what they're scraping. I mean, I don't want to be the source of, you know, of some data for ChatGPT with Oh, I see OK, from that perspective. Yeah, I got you. So from that perspective, what GPT does if Apple it's just on your own device, you don't have to worry about that for their their small language model. That's that's the this really small model in terms of GPT. They there is no they're not giving your personal data away. There's a there's a firewall between your personal data, your texts, your emails, your photos, all of that GPT is not seeing any of that. It's sure you 100% sure I want to make you're giving me some comfort. Not like I'm some weird yes, the reason why the reason why I'm sure that was apples message on Monday was that privacy is paramount and they're not going to go and basically say it's private, but by the way, tunnel all the data over to GPT. That would be a nightmare.