Senior equity research analyst Wamsi Mohan and his team described a future where phones will need far more computing power in order to handle the daily use of “AI agents” that will help with everything from booking travel and real-time translation to scheduling and tutoring. For Apple and its installed base of over 2.2 billion active smartphones, that means a massive opportunity to sell customers on the latest and greatest AI tech.

“We see the introduction of AI smartphones (IntelliPhones) as a once in a decade upgrade event,” Mohan and his team wrote, forecasting “a multi-year upgrade cycle similar to the step function improvement driven by the introduction of smartphones.”

IntelliPhones are set to offer a new experience for consumers that smartphones won’t be able to compete with, including augmented- and virtual-reality experiences, health monitoring, and more, according to BofA’s analysts. “As AI technology evolves the gap between IntelliPhones and traditional smartphones is likely to widen further by offering even more sophisticated and personalized functions driving the desire to upgrade,” they wrote.

Shares of Apple have risen just over 7% during the past 12 months, lagging compared to the S&P 500 and particularly the soaring Big Tech sector. But with the era of AI-enabled phones on the horizon, Bank of America analysts expect a turnaround. Mohan and his team reiterated their buy rating and a $230 price target on shares of Apple Wednesday. It’s an outlook that represents a potential 20% gain for Apple investors over the next 12 months, but that rise would also leave the Cupertino-based tech giant with a lofty valuation of 30 times its fiscal year 2025 earnings.

Still, Mohan and his team said that they believe that higher valuation “is justified given a multi-year [iPhone] upgrade cycle, large cash balance and opportunity to diversify into new end markets, increasing mix and diversity of services.” 

“We see IntelliPhones dominating edge AI, as compared to AI PCs, given their portability, features and cost,” he added.

One of the keys to the success of IntelliPhones will be AI developers, according to Bank of America. Mohan and his team said they believe that developers will build AI agents that will run on Apple’s phones, creating “a new layer of monetization” for the company.

The comments echo the AI optimism that CEO Tim Cook described in Apple’s May 2 earnings call. “We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple’s unique combination of seamless hardware, software, and services integration, groundbreaking Apple silicon with our industry-leading neural engines, and our unwavering focus on privacy, which underpins everything we create,” he said.

CFRA Research analyst Angelo Zino also maintained his buy rating on Apple shares Tuesday, citing improved iPhone sales prospects in China due to the company’s AI push. After iPhone sales in China wavered in 2022 and 2023 amid rising geopolitical tensions with the U.S. and increased domestic competition, Apple managed to turn things around in April. iPhone sales jumped 52% from a year ago to 3.5 million units last month, and Zino believes Apple’s AI ambitions are likely to kickstart more growth. 

“AAPL’s ambitions towards greater AI capabilities ahead of the iPhone 16 launch this fall should appeal to China consumers and also better position it at the high end of the market,” he wrote.