'Fast Money' traders talk what to expect from Apple's upcoming WWDC

Key Concepts:

• Apple Intelligence (AI)
• Valuation (28x forward multiple)
• China Trade and Market Share
• Services Growth
• Regulatory Concerns
• Developer Ecosystem
• CapEx Spend
• Tariffs and Local Manufacturing
• Installed User Base
• Idiosyncratic Risk

1. Apple's Valuation and Future Growth

• The central question is whether Apple can reignite its shares and justify its 28 times forward multiple.
• One perspective is that the bar is low for Apple, and positive developments in China trade could provide a boost.
• The potential for "Apple Intelligence" is seen as a key factor for future growth.
• Concerns about regulatory issues are considered overdone.
• The dynamic around services and the distribution of AI are also important factors.
• Apple's valuation is compared to Nvidia's, highlighting a significant discrepancy in sales growth multiples (4x for Apple vs. 40x+ for Nvidia).
• Slowing growth and losing market share in China are key concerns that need to be addressed with an AI story.

2. Apple Intelligence (AI) Strategy

• The best days of Apple Intelligence are considered to be ahead.
• Apple's lack of significant investment in AI (CapEx spend) is seen as both a weakness and a potential strength.
• The idea is that Apple could "plug in" AI through partnerships (e.g., with Perplexity) rather than developing everything in-house.
• The lack of robust CapEx spend in AI is contrasted with a hypothetical scenario where Apple had spent $50-70 billion without delivering results, which would be a major negative.

3. China and Geopolitical Risks

• China tariffs and potential requirements for local manufacturing are identified as key risks.
• However, these challenges are not unique to Apple and affect other companies as well.
• There is idiosyncratic risk related to Apple's ability to expand its manufacturing in India.

4. Developer Ecosystem

• Maintaining a strong developer ecosystem is crucial for Apple's success.
• The focus should be on addressing developers' concerns about processing fees and fee circumvention.
• Apple needs to remain the preeminent platform for developers to maintain its robust user install base and service engine.
• Success in attracting and retaining developers is seen as a potential upside for Apple.

5. Services as a Key Driver

• Services are growing at 23%, a significant increase from the 10% growth rate in previous years.
• Services are considered the key factor justifying Apple's valuation.
• The 2.35 billion installed base is a valuable asset that drives the utility of Apple's services.

6. Historical Context and Competitive Landscape

• The example of BlackBerry is used to illustrate the risk of falling behind in technology.
• If Apple doesn't develop a strong AI offering, companies like OpenAI could potentially disrupt the market.

7. "Crazy Like a Fox" Analogy

• The phrase "crazy like a fox" is used to describe Apple's strategy.
• The idea is that Apple may appear to be behind in AI, but this could be a deliberate strategy to avoid overspending and to leverage external partnerships.
• When other "Mag Seven" companies traded off precipitously after the deep sea headline, Apple was up 2-3% within the first week and outperformed a month out.

8. Conclusion

• The overall sentiment is cautiously optimistic about Apple's future.
• The key factors to watch are Apple's AI strategy, its ability to maintain its developer ecosystem, and its performance in the China market.
• The growth of services is a positive sign, but Apple needs to address concerns about its valuation and its lack of AI investment.