iPhone 16 is about to be launched, Citigroup believes that Apple will replace NVIDIA and become the &#34;top choice stock for AI&#34;.On August 29th, Citigroup analysts listed Apple's stock as the &#34;top choice stock for AI&#34; in 2025, surpassing Arista, a network equipment manufacturer.Citigroup believes that the launch of the AI ecosystem is divided into three stages, the first stage being chips/servers, the second stage being network/storage, and the third stage being devices. Citigroup classifies the first two stages as the &#34;infrastructure stage&#34;, and the institution believes that the AI industry has already entered the infrastructure stage and is about to enter the final stage - the device era.Although NVIDIA currently dominates the AI infrastructure stage, the time for AI technology to transition to device functionality seems to have arrived. Citigroup believes that with the introduction of &#34;Apple Intelligence&#34;, Apple will shine in the AI device era.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/641e2e9a-5d03-41cb-a4ad-10a68689c317.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/641e2e9a-5d03-41cb-a4ad-10a68689c317.png"/><h2>iPhone 16 is about to be launched, Citigroup expects AI to be a major highlight</h2>Currently, Apple is about to launch the new product iPhone 16, which is scheduled to be officially unveiled at the &#34;It's Glowtime&#34; product launch event on September 9th.Citigroup analysts expect that how the hardware upgrade of iPhone 16 better supports AI functions will be a major highlight of the launch event. The analysts wrote in their research report:<blockquote>Apple's new product launches in September usually focus on hardware upgrades, but we believe the company will emphasize how the hardware updates of the iPhone 16 series will better support Apple Intelligence functions, which are expected to be officially launched later this fall.</blockquote>Apple Intelligence integrates AI large language models into a series of Apple devices such as iPhone, iPad, and Mac, which can help users write documents, proofread content, and generate images. According to industry insider Mark Gurman, Apple has started training retail store employees on Apple Intelligence and plans to make it a major selling point for the iPhone 16 series.Not only iPhone 16, Citigroup believes that next year's iPhone 17 will further focus on upgrading AI functions. The institution predicts that the shipments of iPhone 16/iPhone 17 in 2024 and 2025 will be 85 million and 92 million respectively, with total shipments of 228 million and 241 million units.Citigroup analysts wrote:<blockquote>Before AI smartphones become popular in the mass consumer market, consumers need time to test all these new features and truly see how they will improve daily life. We believe Apple is most capable of achieving this goal, as it is in a leading position in the high-end smartphone market and can seamlessly integrate software and hardwareCitigroup analysts stated that since 2016, during the period from the June financial report season to the September new product launch event, Apple's stock performance has on average outperformed the market by 5%-6%. The institution rates Apple's stock as a buy with a target price of $255.</blockquote><h2>The AI smartphone market has huge potential, IDC predicts: By 2028, over 70% of smartphones will have generative AI capabilities</h2>According to Citigroup, the AI smartphone market has huge potential. Their analysts cited IDC data in a research report, stating that the annual compound growth rate of AI smartphones in the next 5 years will reach 78.4%, far exceeding the market average.In July of this year, IDC raised its forecast for the shipment volume of generative AI smartphones, expecting it to reach 234 million units by 2024, higher than the previous forecast of 170 million units in February. This will account for nearly 20% of the total smartphone shipments, significantly higher than the 51 million units and 4% market share projected for 2023.IDC also predicts that from 2023 to 2028, the compound annual growth rate (CAGR) of generative AI smartphones will reach 78.4%, while the overall smartphone market's annual growth rate is only 2.3%. This implies that by 2028, over 70% of smartphones will have generative AI capabilities.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/60e6c21c-fc15-4803-aff5-5356a079a36c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/60e6c21c-fc15-4803-aff5-5356a079a36c.png"/>The next-generation AI smartphones defined by IDC refer to systems-on-chip (SoC) that can efficiently run local generative AI models, equipped with neural processing units (NPU) capable of at least 300 trillion operations per second (TOPS).Citigroup mentioned that currently, Apple's A17 Pro (for iPhone 15 Pro), as well as MediaTek's Dimensity 9300 and Qualcomm's Snapdragon 8 Gen 3, meet this standard

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Citi believes that the AI industry will transition from the infrastructure stage to the device stage, and Apple is expected to shine in the era of AI devices with "Apple Intelligence". AI will also be a major highlight of Apple's September new product launch event. IDC predicts that by 2028, over 70% of smartphones will have generative AI capabilities

- Citigroup predicts Apple will surpass Nvidia as the "AI top pick" with the upcoming iPhone 16 launch, focusing on AI ecosystem phases and Apple's advancements in AI devices.
- The iPhone 16 launch, expected soon, is anticipated to highlight hardware upgrades supporting AI features, with Apple integrating AI language models into its devices for tasks like document writing and image generation.
- Citigroup foresees AI becoming a key focus for future iPhones, estimating significant shipment volumes for iPhone 16 and 17, emphasizing Apple's leading position in seamlessly integrating software and hardware for consumer benefit.

Citi: Why did Apple replace NVIDIA as the top AI stock