Jim Cramer Backs Apple as Underrated AI Stock Play

While Jim Cramer famously named his dog after Nvidia to emphasize his bullishness on Jensen Huang’s company, the Mad Money host has recently turned his attention to Apple as a potentially undervalued AI play. Cramer’s enthusiasm comes at a time when Apple has significantly underperformed other Magnificent Seven members, with AAPL stock up just over 4% year-to-date compared to much stronger gains from AI-focused peers. The recent iPhone 17 keynote, which featured minimal AI advancements, initially sent shares lower before strong consumer demand sparked a recovery that saw the stock gain back all losses and then some.

Cramer’s contrarian view stands in stark contrast to prevailing market sentiment, which has grown increasingly impatient with Apple’s measured approach to artificial intelligence. Despite a September surge of around 10%, many AI investors remain skeptical about Apple’s strategy, particularly given the lack of AI features in recent product announcements. However, Cramer astutely notes that Apple’s massive installed base and consumer loyalty provide a foundation that other AI competitors simply cannot match, with crowded Apple Stores and long lines for the iPhone 17 demonstrating that customers aren’t abandoning the ecosystem despite the AI delay.

At the core of Cramer’s bullish thesis is what he describes as Apple’s ‘pay-to-play’ AI strategy. Rather than spending billions to develop proprietary AI models and stockpile Nvidia GPUs, Apple appears positioned to leverage its platform by allowing AI model makers to compete for placement on iPhones. ‘Turns out Apple always had an AI strategy: pay to play,’ Cramer noted, capturing the essence of Apple’s potential approach. This strategy mirrors the company’s highly profitable search deal with Google’s Alphabet, where Google pays substantial sums to remain the default search engine on Apple devices.

The recent favorable legal ruling for Google of Alphabet may have actually strengthened Apple’s position in the AI landscape. Rather than being forced to develop its own AI models, Apple could potentially charge companies like Google to have their Gemini AI model as the default option on iPhones. This approach would allow Apple to generate significant AI-related revenue without the massive capital expenditure required to build competing models from scratch. Cramer believes this gives Apple ‘all of the cards’ in the emerging AI ecosystem.

This capital-light strategy could prove particularly advantageous as investors increasingly focus on AI profitability. While competitors pour billions into AI infrastructure with uncertain returns, Apple’s approach positions it to generate high-margin revenue from AI without bearing the full cost of development. The company’s massive installed base of loyal customers creates a platform that AI developers desperately need to access, giving Apple unprecedented leverage in negotiations.

Despite trading at 38.8 times trailing price-to-earnings, Cramer sees Apple as having substantial upside as its AI strategy unfolds. The recent iPhone 17 launch appears to have kicked off a strong upgrade cycle, with packed Apple Stores and renewed consumer enthusiasm suggesting the brand’s appeal remains undiminished. This consumer loyalty provides Apple with the runway needed to execute its long-term AI game plan without rushing to market with underdeveloped features.

Cramer’s analysis suggests that when it comes to AI monetization potential, Apple might actually be ahead of competitors rather than behind. The company’s ability to integrate AI into its existing revenue streams—through app store placements, default model agreements, and ecosystem enhancements—could generate returns that become the ‘envy of the industry.’ Recent rumors of an AI search product that could enhance Siri as early as next year further support the notion that Apple’s AI capabilities are more advanced than its public presentations suggest.

For investors who sold Apple shares following the iPhone 17 keynote, Cramer’s perspective presents a challenging dilemma. With the stock trading around $255 per share and showing renewed strength, the opportunity cost of staying on the sidelines could be significant. Cramer’s contrarian view, coming at a time when many are ready to ‘throw in the towel’ on Apple’s AI prospects, represents one of the most compelling cases for the Cupertino giant’s AI potential this year, clearing the air on what makes Apple’s approach uniquely positioned for success in the evolving artificial intelligence landscape.