Apple's stock could rise 30% if it strikes an Nvidia deal for AI, this analyst says

By William Gavin

A Rothschild analyst suggests Apple could improve upon its 'subpar' AI efforts by deploying Nvidia's open-source models

Apple currently has an AI partnership with Google, but a Rothschild analyst thinks an Nvidia deal might better suit the company's interests.

Apple's artificial-intelligence efforts have been "disappointing," but one analyst sees room for the iPhone maker to turn things around, possibly by partnering up with Nvidia.

The smartphone maker hasn't spent nearly as much money as fellow Big Tech companies on AI, and its foundation models are "far from the frontier" level and "subpar," according to Rothschild & Co Redburn analysts. That led Apple (AAPL) to strike a deal for use of Alphabet's (GOOG) (GOOGL) Gemini models so that it can offer generative AI services to its customers.

According to Rothschild, Apple has been paying Google roughly $1 billion a year to access Gemini. But Apple can strengthen its AI positioning by deepening its ties with Nvidia (NVDA) and deploying open-source models, the analysts led by Timm Schulze-Melander said in a client note. They began recommending Apple's stock in their latest report.

Leveraging an Nvidia relationship would cut Apple's reliance on a direct competitor - Google - without requiring the company to give up much in terms of capabilities, Schulze-Melander said. Plus, using Nvidia's AI technology and open-source models could allow Apple to focus elsewhere on its chip development.

Last week, Nvidia launched the Nemotron 3.5 Lightning, an open model that the company said delivered four times the output speed of similar-sized models. In a letter defending open models last month, Nvidia argued they give customers greater control over their data and help them prevent being "locked into a single provider."

Apple would likely need to spend more money as part of this strategy. Rothschild said that Apple and Nvidia have had a "genuinely acrimonious" relationship dating back to "Bumpgate."

That's a reference to 2008, when Apple found that some MacBook Pro computers had Nvidia graphics processors that could fail due to a packaging defect, as CNET reported at the time. Their relationship has been rough since then, according to reports.

"A close, favourable partnership requires both Apple and Nvidia to want it," Schulze-Melander wrote.

Rothschild now sees room for Apple's stock to increase about 30% and trade at $400 a share. That would depend on a "strategic reset" of Apple Intelligence, helped by an Nvidia deal. A foldable iPhone, rumored to be called the "iPhone Ultra," would also help.

Apple is expected to unveil the Ultra in September, launching the company into the extra-premium smartphone market. Rothschild expects Apple to sell 14 million units in fiscal year 2027, "conservatively" cannibalizing just 2% of traditional iPhone sales.

Rothschild expects the foldable smartphone to have a price of $2,199, roughly in line with many other analysts' estimates and an 83% average selling-price premium, compared with the iPhone 17 Pro Max.

But Jefferies' Edison Lee said the model could cost consumers as much as $3,099, depending on storage capacity. That could make it a "niche" product, he said in a recent client note.

-William Gavin

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08-17-26 1200ET