Apple's Future Is Riding on AR and VR Technology

Apple Inc. (ticker: AAPL) is unveiling some exciting new technology at its World Wide Developers Conference this week. True to the conference's name, the most meaningful news out of the conference for long-term Apple investors may have been its new augmented reality and virtual reality development tools.

Apple announced a new 10.5-inch iPad Pro and a new peer-to-peer payment feature for Apple Pay that will compete with Paypal Holdings (PYPL), Square (SQ) and others. But for Apple investors looking for a major long-term catalyst for the stock, Apple's push into AR and VR could put the company at the forefront of a massive new market.

Apple unveiled AR development kit ARKit at WWDC, a platform which will allow app developers to start producing AR content. In addition, Apple treated the WWDC audience to the company's first virtual reality demonstration. Also, Apple announced the new iMac Pros are equipped with more robust graphics hardware that can handle the demands of VR software.

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Loup Ventures analyst Gene Munster says investors should expect Apple to be the leader of the new AR market right out of the gate. "ARKit is the single most important announcement," Muster says, "enhancing iOS 11 devices for augmented reality."

Muster says AR will be the core technology that eventually replaces the smartphone. "Today's announcement lays the groundwork for Apple to succeed in that future as ARKit represents the first tangible commitment from Apple to establish itself as the leader in the race to build a dominant AR-driven OS," he says.

Munster says Apple's AR lead over rival Alphabet (GOOG, GOOGL) is already huge. Loup estimates ARKit will have a user base of hundreds of millions of Apple users, while Google's Tango platform has only around 10 million users.

Apple iPhone users could get their first taste of AR technology later this year. Munster expects the highly anticipated 10-year anniversary iPhone will be enhanced with AR features.

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