Apple's AI Strategy Could Take a Major Turn? Analyst: Stock Could Hit $400 if It Partners with Nvidia

According to Marketwatch, Apple (AAPL-US) experienced volatile trading on Monday (17th), briefly dipping to $302.94 before closing down 0.11% at $305.59 per share, maintaining a market capitalization of $4.46 trillion. Although Rothschild & Co Redburn upgraded Apple’s rating to 'Buy' with a target price raised to $400 from $260, the market remains cautious about whether Apple Intelligence can reverse its momentum through a potential partnership with Nvidia, and whether a high-priced foldable iPhone can generate new upgrade demand.

Apple’s progress in artificial intelligence (AI) continues to face skepticism. However, Rothschild & Co Redburn believes that if Apple restructures its Apple Intelligence strategy and partners with Nvidia (NVDA-US), its stock price could rise approximately 30% to $400 per share.

Rothschild has upgraded Apple’s investment rating from 'Neutral' to 'Buy' and significantly raised its target price from $260 to $400.

In-house AI model lags; Apple spends $1 billion annually on Google’s Gemini

Rothschild analysts point out that compared to other tech giants, Apple’s investment in AI is notably low. Its in-house foundational models lag behind industry leaders and have underperformed expectations.

To accelerate the delivery of generative AI services to users, Apple currently collaborates with Alphabet (GOOGL-US), adopting Google’s Gemini model. Rothschild estimates Apple pays Google around $1 billion annually for this arrangement.

However, Google is also a competitor to Apple in operating systems, smartphones, and AI services. Rothschild argues that by deepening its collaboration with Nvidia instead, Apple could reduce its reliance on Google and redirect more chip development resources toward other key products.

Nvidia’s open-source model emerges as a potential option

Rothschild recommends that Apple integrate Nvidia’s open-source AI models to enhance the functionality and competitiveness of Apple Intelligence.

Last week, Nvidia launched the Nemotron 3.5 Lightning open-source model, claiming it delivers output speeds up to four times faster than comparable models. Nvidia also emphasizes that open-source models allow enterprises greater control over data and reduce the risk of vendor lock-in.

However, the feasibility of such a partnership remains uncertain.

Apple and Nvidia have had a strained relationship for years, dating back to the 2008 'Bumpgate' incident. At that time, defective packaging in Nvidia graphics chips used in certain MacBook Pro models led to potential failures, souring relations ever since.

Rothschild analyst Timm Schulze-Melander notes that establishing a close, mutually beneficial partnership ultimately depends on whether both Apple and Nvidia are willing.

Foldable iPhone Ultra seen as another growth driver

Beyond restructuring its AI strategy, Rothschild is optimistic about Apple’s rumored first foldable smartphone, the 'iPhone Ultra,' believing it could help Apple enter the ultra-premium smartphone market.

The market expects Apple to unveil the iPhone Ultra as early as September. Rothschild estimates its price at $2,199, 83% higher than the average selling price of the iPhone 17 Pro Max, and forecasts 14 million units sold in the fiscal year 2027, though it may cannibalize about 2% of traditional iPhone sales.

However, Jefferies analyst Edison Lee holds a more conservative view. He estimates the iPhone Ultra could reach up to $3,099 depending on storage capacity, warning that such a high price could limit it to a niche product for only a small segment of consumers.