Investors and tech enthusiasts alike are closely watching Apple Inc. (AAPL  ), with the upcoming iPhone 16 and its AI-driven features generating significant buzz.

Wedbush analyst Daniel Ives sees Apple on the "path to $4 trillion" and recently addressed the catalysts that are driving this growth.

China - 'Linchpin Of Growth' For Apple

Recent supply chain checks in Asia reveal positive signs of iPhone stabilization, a crucial indicator as Apple gears up for the iPhone 16 launch.

Following a better-than-expected March quarter, optimism for iPhone growth is emerging in various markets. Ives predicts that June will mark the last quarter of negative growth for Apple in China, with a turnaround expected in the September quarter.

Ives says "China remains the linchpin of growth for Apple and now this key region is set to see growth once again starting with iPhone 16."

Up Ahead - A Golden AI Upgrade Cycle For Apple

Since the Worldwide Developers Conference (WWDC) in early June, confidence has been growing in the Asian supply chain regarding the iPhone 16's potential.

Ives believes this AI-driven upgrade could represent "a golden upgrade cycle for Cupertino looking ahead with pent-up demand building globally." Cupertino is poised to become "gatekeepers of the consumer AI Revolution," with the integration of Apple Intelligence.

This integration means developers and tech giants like Meta Platforms Inc (META  ) and Alphabet Inc (GOOG  ) (GOOGL  ) will likely need to incorporate their AI models into Apple's ecosystem.

Monetization Opportunities For Apple

Ives also noted that the partnership with OpenAI is creating a global highway for developers to focus on iOS 18, paving the way for monetization opportunities for Apple.

He estimates that this could lead to an annual incremental growth of $10 billion in high-margin services for Apple. This AI wave is expected to generate a new, multi-pronged revenue stream driven by both hardware and software, potentially adding $30 to $40 per share.

Why Wedbush Is Bullish On Apple

Ives maintains an Outperform rating and a $275 price target for Apple, underpinned by several key factors:

  • Achievable iPhone Estimates: Current iPhone estimates for 2024 are within reach, with 2025 estimates seen as conservative.
  • Pent-Up Demand: The AI-driven supercycle is poised to unleash significant demand, with an estimated 270 million iPhones not upgraded in over four years. This is to begin with iPhone 16, this fall.
  • Solid Services Growth: Apple's services sector remains robust, with double-digit growth providing critical valuation support.
  • AI Integration: Ives sees monetization opportunities across both services and hardware opening up with AI integration into Apple's ecosystem.
  • Unmatched Installed Base: Apple boasts the strongest installed base globally, with 2.2 billion iOS devices.
As the market begins to recognize the transformative potential of Apple Intelligence and the upcoming iPhone 16, Ives' bullish stance suggests that Apple's journey towards a $4 trillion valuation is just beginning.