Apple (NASDAQ:AAPL) stock hit successive all-time highs this week, topping the $700 billion market cap mark for the first time since 2015. Shares of the worldâs most valuable company have rallied 40% over the past year on speculation that a feature-rich 10th anniversary iPhone will spark a mega-upgrade cycle.
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That raises some interesting questions: Is the rally sustainable? Will the tech giant meet investorsâ expectations? And whatever happened to âthe best product pipeline in 25 yearsâ that we heard so much about back in 2014? Last time I checked, we were still waiting for the next big thing.
Was it Apple Watch? Apple Pay? Apple TV? Apple Music? Maybe Iâve been spending too much time binge watching on Netflix (NASDAQ:NFLX). Did I miss something?
Letâs face it, none of those products are game changers like the iMac, MacBook Air, iPod, iPhone and iPad were. Which brings us to my final question for Apple: Is that really all youâve got? Because Iâm feeling a little let down.
Thereâve been no shortage of product teases that never came to fruition. An integrated television was supposed to revolutionize the living room. A streaming TV service was supposed to get us to cut the cord. Now we hear that the Applemobile is on hold. And Siri still canât hold a conversation.
Meanwhile, the companyâs R&D budget has exploded. What gives?
Hereâs what I think is going on and whatâs next at Apple.
First and foremost, Apple is an iPhone company. Its flagship product accounts for the majority of revenues and profits, and will come maddeningly close to hitting $1 trillion in sales on its 10th birthday. The company is far from a one-trick pony, but even if it were, youâve got to admit, itâs got one hell of a trick.
For 2017, thereâve been reports of flexible OLED displays, wireless charging and infrared 3D sensors for augmented reality apps like PokÃ©mon and Snapchat. We can speculate on which models will get which features and what theyâll be called, but Apple looks to be pulling out all the stops to ensure that the iPhoneâs diamond anniversary is special.
And yet, global smartphone growth is slowing and, more concerning, analysts worry that the form-factor will someday disappear. I doubt that will happen, at least not for the foreseeable future.
If you think about it, everyone watches TV, listens to music, talks on the phone, browses the Web, texts and emails. Smartphones do all those things. In a gadget-crazed world, if you could only have one, that would be it. That is, as long as the operating system and hardware keep up. Ten years in, so far, so good, but smartphones have a long way to go.
As for Apple, margins may decline over time, but its ecosystem of services â Apple Store, Pay and Music â are growing nicely, while at the same time making it harder to switch. Thatâs why Apple is now making original video content like âPlanet of the Apps.â Services provide nearly frictionless revenue and profit growth. Services are a big deal.
That said, Nokia once ruled the cellphone market. BlackBerry (NASDAQ:BBRY) used to dominate smartphones. Every company is subject to disruptive innovation and Apple is no exception. The biggest competitive risks the Silicon Valley giant faces are from augmented reality (AR) and machine learning.
CEO Tim Cook seems to be well aware of that. In a recent interview he called AR âa big idea like the smartphoneâ and said that machine learning applications are an exponential driver for advancing the companyâs chip technology. Heâs right on both accounts, in my opinion.
The one thing that has kept computers from playing a bigger role in our lives is that they live in a machine world of bits and bytes, while we live in a human world of sights and sounds. Our primary interface â two-dimensional screens and keyboards â has kept us from working together seamlessly. Thatâs rapidly changing.
Computers are learning to write their own code, enabling big leaps in speech and visual recognition applications that companies like Amazon (NASDAQ:AMAZN), Alphabet (NASDAQ:GOOGL) subsidiary Google and Tesla (NASDAQ:TSLA) are exploiting for smart assistants and self-driving cars. And startups like Magic Leap and Snapchat parent Snap Inc., which is planning a March IPO, are working to advance AR through smart glasses.
Machine learning and AR are key to Appleâs future. Siri has to learn to become smarter and more conversational, and Appleâs devices must become AR-capable for a visual first world: first iPhone, then a smart glasses product. Thatâs the next big thing. If thatâs not in Appleâs product pipeline, I say itâs in big trouble.