Apple Inc. (AAPL  ) may not need to build the world's best AI model to become one of the biggest financial beneficiaries of consumer AI. In a Yorkville Ives' note, Dan Ives argues that Apple's real advantage is sitting between AI and more than 2.5 billion active devices - creating a potential toll road that could turn Apple Intelligence into a new Services growth engine.

Apple's AI Advantage Is Distribution

Much of the debate around Apple's AI strategy has focused on whether Cupertino arrived too late to generative AI. Ives believes investors should ask a different question: How effectively can Apple put useful AI in front of its enormous installed base?

Apple has more than 2.5 billion active devices globally, including 1.5 billion iPhones, according to Ives. That gives the company something many AI developers cannot easily replicate: a massive consumer distribution network already embedded in daily life.

Apple's approach also fits its existing ecosystem, combining on-device processing, personal context, hardware-software integration and privacy. The goal is to make AI less like a separate application and more like a layer running throughout the Apple experience.

That is why Ives says Apple could become "the toll collector on the consumer AI highway."

The distinction matters for investors. Apple does not necessarily need to win the race to build the most powerful foundation model. It needs to capture value as consumers use AI through its devices, operating systems and developer ecosystem.

The Services OpportunityIves sees the bigger opportunity emerging as consumer AI moves into health, fitness, finance, gaming and everyday activities.Apple can give developers access to a massive installed base while creating new monetization opportunities inside Services. Ives estimates AI-influenced revenue could eventually account for more than 15% of Apple's Services revenue, a contribution he believes Wall Street isn't fully reflecting in the current valuation.Ives says Apple's AI vision and monetization opportunity could be worth roughly $75 per share, helping underpin his $400 price target.

That thesis is also supported by Apple's next hardware cycle.

iPhone 18 Adds Fuel

Ives estimates roughly 375 million iPhones have not been upgraded in more than four years, creating a substantial pool of potential upgrade demand.

The new iPhone Duo could add another catalyst. Ives expects Apple to sell roughly 10 million Duo units over the next few quarters, with a best-case scenario of about 15 million through the holiday season.

He views the device as the first major new hardware innovation from Cupertino since AirPods and potentially the start of a broader hardware cycle under CEO John Ternus.

That creates an unusual setup: AI could make Apple's installed base more valuable, while aging devices and a new foldable could encourage customers to refresh that base.

Investors should watch whether Apple can turn AI from a feature into recurring Services revenue. If Ives is right, Cupertino does not need to build the entire consumer AI highway - it just needs to collect the toll.