This summer, investment bankers approached tech giant Apple (AAPL) to see if the company was interested in making a major move in artificial intelligence, according to The Information. But unlike rivals such as Google (GOOGL) and Meta Platforms (META), which have spent billions on AI deals and licensing agreements, Apple has mostly stuck to its traditional strategy of small acquisitions. However, internally, Apple has considered bigger targets like Mistral and Perplexity, but it hasn’t gone through with anything, which has worried investors and analysts that Apple may be falling behind in the AI race.
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Interestingly, there are mixed opinions within Apple about whether it should go bigger. For example, Eddy Cue, a longtime executive and head of services, has been one of the strongest voices pushing for bolder deals. In the past, he pushed for Apple to buy companies like Netflix (NFLX) and Tesla (TSLA) and was behind the $3 billion Beats deal in 2014. However, other leaders like Craig Federighi, Apple’s head of software, have been more hesitant since they prefer to develop technology in-house rather than acquire it.
Despite having over $133 billion in cash, Apple has avoided large acquisitions due to worries about overpaying or creating culture clashes. Indeed, its corporate development team, led by Adrian Perica, typically avoids using outside bankers and prefers carefully calculated deals. Still, the AI world is moving fast, with Google and Meta buying up top talent through massive deals. In addition, if a court ruling soon ends the $20 billion Google pays Apple each year to be the default search engine, Apple would lose Google as a partner and may have to acquire a search-focused AI startup to fill the gap.
Is Apple a Buy or Sell Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on AAPL stock based on 16 Buys, 11 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average AAPL price target of $239.60 per share implies 5.4% upside potential.
