Apple's (AAPL) potential partnership with Alibaba Group (BABA) to roll out its artificial intelligence features in China could serve as a growth catalyst for the iPhone maker in the key region, Wedbush Securities said in a Monday client note.

Last month, Alibaba Chairman Joe Tsai reportedly said at the World Governments Summit that the Chinese e-commerce giant will partner with Apple to launch AI features for iPhones sold in China.

China has been a "major headwind" for Apple in the past year with the tech giant losing some market share to local rival Huawei, according to Wedbush. There is "growing confidence" inside and outside China that Apple's AI features will be launched in the June quarter, the brokerage said.

Wedbush estimates that more than 100 million of roughly 200 million iPhones in China are set for a potential upgrade. Apple Intelligence, which was launched on the iPhone 16 model, proved to be a driver for upgrades in the US and a similar story is expected when the features are released in China, according to the brokerage.

"We estimate roughly 25% of the world's population will eventually access AI through an Apple device over the next few years," Wedbush analysts led by Daniel Ives wrote in the note. "Alibaba in our view is leading the broader AI and cloud narratives in China and along with more stimulus coming from Beijing this is the right partner and right timing for Apple to ink this deal."

Apple's plans to launch its AI features in China come amid President Donald Trump's decision to impose tariffs on the country, which responded with retaliatory duties on the US. Despite the US-China tensions, the brokerage expects the company and Chief Executive Tim Cook to balance out its growth strategy in China.

Wedbush maintained its outperform rating on Apple's stock and reiterated its 12-month price target of $325. "We believe starting in the June quarter growth returns to this flagship region with easier comps going forward into (Fiscal 2026)," according to Ives.

Last week, Apple disclosed plans to spend over $500 billion in the US over the next four years, including an AI server factory in Texas.