Investing.com -- Apple's (NASDAQ:AAPL) partnership with Alibaba (NYSE:BABA) as part of its China AI strategy marks “a big step forward” for the technology giant, Wedbush analyst Daniel Ives said in a Friday note.
This collaboration marks the end of Apple's search for a Chinese tech ally, a key factor for the launch of its AI services in the region. The partnership with Alibaba, alongside Baidu (NASDAQ:BIDU)'s involvement, could propel Apple's growth in China, with a launch date reportedly scheduled for early May.
“The biggest missing piece in Apple's AI launch has been its China strategy which has been in a holding pattern until a Chinese tech partner was officially approved by Beijing and set to launch,” Ives noted.
The union with Alibaba is expected to act as a catalyst for Apple, particularly for iPhone upgrades within China. Analysts at Wedbush estimate that out of approximately 200 million iPhones in China, over 100 million are poised for an upgrade.
Despite losing some market share to Huawei in the past year, Apple is projected to regain momentum with the introduction of Apple Intelligence on the upcoming iPhone 16 and the subsequent iPhone 17 release in September.
Apple Intelligence has already been identified as a key factor in driving upgrades in the US, and similar expectations are set for its impact in China.
“We continue to view this first launch of Apple Intelligence as just the beginning of a broader AI strategy for Apple as we estimate roughly 25% of the world's population will eventually access AI through an Apple device over the next few years,” Wedbush’s team continued.
The anticipated influx of apps built on Apple Intelligence is forecasted to create a substantial new revenue stream for the company and encourage further device upgrades.
Despite skepticism from some critics, Ives and his team argue that the strength of Apple's installed base, which includes 1.5 billion iPhones and approximately 2.4 billion iOS devices, should not be underestimated.
In this light, Wedbush expects Apple to see a resurgence in growth in the China market starting in the June quarter, with more favorable comparisons moving into fiscal year 2026 (FY26).
Although US-China tensions remain a concern, Ives believes that Apple, under CEO Tim Cook's leadership, can navigate its growth strategy effectively in China, as demonstrated by the strategic Alibaba AI deal.
Wedbush maintained its Outperform rating on Apple stock with a price target of $325.