Upgrade cycle narrative faces setbacks as UBS survey shows Apple’s AI features fail to ignite upgrade enthusiasm

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Apple's artificial intelligence feature, Apple Intelligence, has failed to become the catalyst for the iPhone upgrade super cycle anticipated by Wall Street. The latest UBS survey shows that consumers’ willingness to upgrade devices early due to AI features continues to decline, placing renewed pressure on market confidence in the narrative of Apple’s AI-driven growth.

According to the latest report released by UBS analyst David Vogt, its Evidence Lab surveyed over 7,500 smartphone users in five major markets, showing that about 24% of respondents said they would upgrade their phones early because of Apple Intelligence, down about 500 basis points from the first half of the year; meanwhile, the proportion who said AI features had "no impact" on their purchasing decision rose to about 31%, up about 300 basis points.

These results indicate that Apple’s core logic of driving a new hardware upgrade cycle with AI features has yet to effectively convert on the consumer end, and some investors have doubts about the sustainability of further valuation expansion.

Apple Intelligence Losing Power as an Upgrade Driver

UBS pointed out that Apple Intelligence has not yet delivered a substantial boost to user upgrade behavior, and the previously anticipated "AI-driven upgrade cycle" has not materialized. Although the intention to buy iPhones has risen year-on-year in the U.S., U.K., and German markets by about 300, 600, and 400 basis points respectively, showing relative stability, UBS analyst Vogt believes that the AI features announced by Apple at WWDC26 are unlikely to become a key demand driver in the short term.

In the context of cooling AI narrative, the foldable iPhone has become one of the few points of positive sentiment. Although the overall "net interest" in the foldable phone market has fallen by about 600 basis points to -8%, consumer preference for an "Apple-branded foldable phone" is significantly stronger, with the relative premium widening by about 600 basis points to around 48%. UBS expects that Apple may launch its first foldable iPhone at the annual event in September, which could initially bring about 5 million incremental unit sales, equivalent to around 2% upside to its iPhone shipment forecast.

Growth in Shipments and Valuation Constraints Coexist, Apple Awaits New Product Validation

UBS expects that Apple’s FY26 iPhone shipments will reach about 261.6 million units, up about 15.7% year-on-year, mainly driven by increased demand for iPhone 17 and anticipated pre-price-increase demand.

In terms of valuation, UBS maintains Apple’s target price at $296, based on projected 2027 earnings per share of $9.86 and a price-earnings ratio of 30 times. The firm believes that the current stock price already partially reflects improved short-term iPhone demand and AI option value, but uncertainty around the product roadmap, weak performance in the China market, and pricing factors limit further upside for the valuation.

According to consensus data, Wall Street overall maintains a bullish stance on Apple: 35 analysts rate it "Buy", 19 "Hold", 2 "Sell", with a 12-month average target price of about $319. Apple's stock price is currently back above $300. As the AI-driven upgrade narrative has not yet materialized, market focus is shifting from "technology narrative" to "hardware cycle and product rollout timing".

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