Apple (AAPL) CEO John Ternus believes that the company doesn't need to develop the world's most powerful AI model to keep the iPhone relevant. In an interview with Time that was published on Thursday, he argued that people will still want smartphones to communicate and take photos even as AI becomes more advanced. His comments come as Apple prepares to open pre-orders for its $1,999 foldable iPhone Duo on October 16.

Ternus, who succeeded Tim Cook on September 1, believes that Apple's strength comes from building the devices that people use to access AI rather than from developing the underlying technology itself. The company has already taken that approach with Siri.

Apple signed a multiyear agreement with Google's parent company Alphabet (GOOGL) in January to develop its next generation of AI models using Google's Gemini technology. However, Apple still controls how Siri works, and it processes requests on devices or through its privacy-focused servers.

For example, someone can ask Siri to find a flight confirmation that is buried in their messages instead of searching through several apps. Still, the arrangement means that Apple depends on a competitor for an important part of its AI technology.

Apple's Hardware Business Gives It an Advantage in AI

For now, Apple's devices remain a large business. Its iPhone revenue grew by 22% to $54.25 billion in the June quarter, while services revenue increased by 12% to $30.74 billion. Apple also has 2.5 billion active devices, which gives AI developers access to a large potential customer base if they make their technology compatible with Apple's products.

Meanwhile, the iPhone Duo shows where Ternus is focusing the company's attention. The device opens up into a 7.6-inch screen and folds down to a 5.4-inch outer display, which allows customers to use a tablet-sized screen without carrying a separate tablet.

Apple also says that its new A20 Pro chip comes with twice the AI processing power of the previous generation. This will allow more advanced AI features to run directly on the device.

Is Apple a Buy or Sell Right Now?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on AAPL stock based on 16 Buys, 11 Holds, and four Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average AAPL price target of $334.91 per share implies that shares are trading near fair value. (See AAPL's Stock Forecast).