Apple Inc AAPL may have just found its secret weapon to reclaim lost ground in China – Alibaba Group Holding Ltd BABAF BABA.

After months of uncertainty, Apple has reportedly teamed up with the Chinese tech giant to bring AI features to iPhones in the country, giving investors a reason to cheer.

Apple's AI Gamble In China

The move couldn’t come at a better time. Huawei has been eating into Apple’s market share, riding high on AI-powered smartphones, while Apple's latest iPhones have lacked the AI muscle that's become a key selling point.

With the iPhone 16 getting a boost from China's smartphone subsidies, Apple’s AI-driven upgrade cycle could be the catalyst needed to reignite sales heading into the iPhone 17 launch.

Read Also: Apple’s AI Split: Chooses Alibaba For China And OpenAI For Everyone Else

JPMorgan Sees A Game-Changer

JPMorgan analyst Samik Chatterjee sees this as a game-changer. While Apple is keeping quiet for now, reports suggest the company has already submitted its AI models for regulatory approval—positioning itself ahead of the iPhone 17 cycle.

Chatterjee expects this AI integration to lift investor confidence in Apple's replacement cycle, with the stock's next earnings multiple peak potentially landing in the 32x-33x range.

Alibaba Beats Baidu For The AI Spot

Apple initially eyed Baidu Inc BIDU for its China AI partner but reportedly wasn't impressed with its progress. Instead, Alibaba won out, thanks in part to its vast user data, which could help Apple train more personalized AI models.

Given that iPhone sales took a hit last quarter due to missing AI features, this partnership could be Apple's ticket to an AI-powered resurgence in China.

Now, the big question: Will Apple's AI bet be enough to fend off Huawei?

Investors seem to think so. For now as the stock closed the trading day Tuesday at $232.62, up 2.18%.

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