Netflix and Apple: Surprising Players in AI’s Growth
Most investors recognize major players in artificial intelligence (AI), with Nvidia emerging as a key beneficiary. Tech giants like Alphabet, Microsoft, and Amazon have also begun offering AI-driven cloud services, yielding measurable results.
Among them, Netflix (NASDAQ: NFLX) and Apple (NASDAQ: AAPL) may not commonly be viewed as AI leaders. While they’re significant players on Wall Street, their current AI revenue lags behind that of their tech counterparts. However, both companies stand to gain from advances in AI in the future.
Netflix’s AI-Driven Content Strategy
Generative AI holds promise for streamlining content production at Netflix. CEO Ted Sarandos emphasized the potential for AI to enhance movie quality, noting that expensive special effects are now more affordable, which can reduce overall production costs.
This approach is not expected to yield immediate returns but is designed to boost long-term profitability and free cash flow as higher-quality films attract more viewers. Competition from discounted streaming options remains, but Netflix’s adaptation strategies, including a lower-cost, ad-supported subscription, position it well in the marketplace.
Netflix commands less than 10% of viewing time among connected households, indicating substantial growth potential. As engagement increases, financial outcomes are likely to improve alongside the implementation of AI solutions.
Apple’s AI Innovations in a Competitive Market
Apple has encountered challenges this year due to trade policies affecting its manufacturing costs. Although a recent trade agreement has alleviated some concerns, the impact on Apple’s business has overshadowed its ongoing AI initiatives. Last year, Apple introduced Apple Intelligence, a suite of AI features for its latest iPhones.
Despite these features still being rolled out, they may spur renewed consumer interest and revenue growth in coming years. Apple has developed its own large language model, aiming to enhance this technology over time. Historically, Apple has succeeded by refining existing innovations rather than being the first to market.
Nevertheless, the company’s services segment, which constituted 28% of its revenue in Q2 of fiscal 2025, continues to grow, contributing to higher margins. Given its substantial cash reserves, Apple can shift production if necessary, including domestic manufacturing, supported by a recent $500 billion investment initiative.
In conclusion, despite facing hurdles, Apple’s focus on AI, a growing services sector, and popularity of its devices underscore the potential value of its stock.
Considerations Before Investing in Netflix
Before investing in Netflix, note that it was not included in a recent list by an analyst team highlighting the top stocks to buy now.
Historically, Netflix has generated significant returns for early investors, and it holds a promising growth trajectory as the streaming market evolves. While AI may not drive immediate results, its integration could enhance Netflix’s long-term competitive positioning.
For further insights, review expert analyses and recommendations relevant to current market dynamics.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
