Apple (NASDAQ:AAPL) just dropped a surprisea budget-friendly iPhone with AI capabilities. The new iPhone 16e, priced at $599, will hit shelves at the end of February, giving consumers a cheaper alternative while still offering the latest Apple technology.

Analysts had expected an updated iPhone SE, but Apple went in a different direction. The iPhone 16e ditches the home button and fingerprint sensor, replacing them with FaceID. It's powered by Apple's A18 chip, the same one found in its higher-end iPhone 16 models, meaning it can handle the same apps, games, and AI-driven features as its more expensive counterparts.

One of the biggest changes? Apple is now using its own cellular modem, the "C1", instead of relying on Qualcomm (NASDAQ:QCOM). The device also has a single camera lens, unlike the multi-lens setups on pricier iPhones, and comes in just two colorsblack and white.

Apple hopes the iPhone 16e will help boost iPhone sales, which dropped 1% year-over-year in Q4 2024. Despite the dip, Apple still pulled in a massive $69 billion from iPhone sales during the period.

For comparison, the regular iPhone 16 starts at $799, while the iPhone 16 Pro begins at $999. Apple's AI-powered Apple Intelligence features are only available on the iPhone 15 and 16 series. AAPL stock has climbed 35% over the past year.