In a recent CNBC interview, Dan Ives, a prominent analyst from Wedbush Securities, and Gil Luria, a senior software analyst at D.A. Davidson, discussed Apple’s surprising move to abandon its electric car project after a decade of speculation. Here’s what they said.
Apple’s Departure
After years of rumors, Apple’s reported decision to wind down its electric car project marked a significant departure from its prolonged exploration of the automotive sector. The move included shifting some personnel from the EV project to focus on generative AI efforts. Dan Ives shared his support for this decision, suggesting that it was the right move to abandon a venture that seemed to be diverting valuable resources.
Ripping the Band-Aid Off
Dan Ives, known for his favorable outlook on Apple, explained that the decision to abandon the electric car initiative was akin to “ripping the Band-Aid off.”
According to him, Apple needed to refocus on its strengths, particularly AI, which aligns more closely with its core competencies. He highlighted the challenges and uncertainties surrounding Apple’s ventures into EVs, suggesting that investors preferred seeing Apple concentrate on AI, an area with enormous growth potential.
A Neutral View
Gil Luria, offering a neutral rating on Apple stock, provided a historical perspective on Apple’s foray into the car market. He explained that Apple initially envisioned a car market where they could achieve significant margins, akin to Tesla’s success.
The Changing Dynamics
However, the evolving dynamics of the electric vehicle market led Apple to realize that the value in cars wasn’t concentrated in computing platforms as initially anticipated. Luria added that, at present, most of the value in the electric vehicle market is not within computing, prompting Apple to pivot towards AI.
Investment in the Electric Vehicle Project
The analysts estimated that Apple might have invested billions in its electric vehicle project over the years, potentially ranging from 8 to 10 billion dollars. While acknowledging that Apple has previously spent significant sums on products that never materialized, the EV initiative was seen as a substantial effort within the company, with expectations of a tangible launch.
The Promise of Generative Artificial Intelligence
Dan Ives reiterated his positive stance on Apple’s focus on generative AI. He highlighted the significance of AI in the Apple ecosystem, referring to it as the “golden goose” for monetization. As AI becomes integrated into various aspects of Apple’s offerings, the company aims to capitalize on this technology, enhancing user experiences and potentially introducing new revenue streams.
The Role of AI in Apple’s Future
The analysts hinted at the anticipation of AI-related announcements from Apple in the second half of the year. The introduction of a separate App Store for AI apps and the incorporation of AI into the iPhone 16 were cited as significant developments.
Both analysts highlighted the importance of AI in Apple’s future and its potential to revolutionize user interactions through advanced features like AI-assisted tasks.
Capital Return
Dan Ives concluded by suggesting that Apple, with its low single-digit growth, should focus on returning more cash to shareholders. He advocated for a more substantial capital return, highlighting that Apple’s current cash return metrics, including a half-percent dividend yield and a two-and-a-half percent market cap buyback, could be enhanced.
Share Your Views
So what are your thoughts? How do you think this strategic move will impact the company’s standing in the tech industry? And what implications might it have for investors seeking long-term growth in Apple’s stock?
