Morgan Stanley: After the dream of building a car is shattered, Apple (AAPL.US) will increase investment in generative AI and has been given a "hold" rating.

Morgan Stanley stated that the news of Apple canceling its electric car project could lead to an increase in the importance of fields such as artificial intelligence. The firm has given Apple a "overweight" rating with a new target price of 220 US dollars. Analyst led by Erik Woodring said, "We believe that the engineering talent, capital expenditure investments, and time spent on the Titan project (Apple's electric car project codename) could be better reallocated to related technologies such as generative artificial intelligence, which has a much higher likelihood of entering the market and strengthening Apple's competitive moat." "We believe that any new talent that can help Apple further advance in artificial intelligence is a positive." The cancellation of the project also highlights a focus on "relative cost discipline", as even though the electric car and autonomous driving car market, valued at around 1 trillion US dollars, could be one of the few areas in which Apple could "move the needle" for its 400 billion US dollar annual revenue. Considering reports of Apple spending 1 billion US dollars annually on the project, it may also improve the company's operating leverage. Analysts stated that in the past three years, Apple's gross margin has increased by about 230 basis points, while the operating profit margin has remained stable.