Nearly every Silicon Valley tech giant seems to be experimenting with augmented reality nowadays, but Morgan Stanley analyst Katy Huberty believes there will be a clear winner in the market: Apple Inc. (AAPL) - Get Apple Inc. (AAPL) Report

Huberty on Tuesday handed Apple its highest price target ever, raising her price target to $253 from $203 and keeping the equivalent of a Buy rating on the stock. Huberty's new price target surpasses the previous record holder, Drexel Hamilton analyst Brian White, who in May established a $202 price target on Apple shares. At $253 a share, Apple's market cap, which currently stands at about $830 billion, would leap to a stunning $1.3 trillion.

TheStreet will be hosting a live blog breaking down Apple's big launch event starting at 12:30 p.m. ET on Tuesday. Please check our home page then for more details.

Shares of Apple were down 0.5% to $160.67 on Tuesday morning. The stock is up about 39% so far this year.

Apple has doubled down on AR technology via ARKit, launched at WWDC in June, which is a developer platform used to create AR applications on iOS 11 for the iPhone and the iPad. The company will release ARKit to the public at its big event on Tuesday, along with three new iPhones (including a souped up 10th anniversary edition), a new Apple Watch and an updated Apple TV model. 

Augmented reality technology works by layering computer-generated graphics, sounds or GPS data onto real-world environments, like live video. Alphabet Inc. (GOOGL) - Get Alphabet Inc. Class A Report , Facebook Inc. (FB) - Get Facebook, Inc. Class A Report and Snap Inc. (SNAP) - Get Snap, Inc. Class A Report have also launched AR-powered products, including Google's ARCore, which competes directly with ARKit, Facebook's Camera Effects feature and Snap's AR lenses and filters. Apple's ARKit might be what causes the technology to reach a tipping point among consumers, however, Huberty said. In that scenario, Apple will benefit the most from the AR wave. 

"We believe ARKit completes the Apple software and hardware ecosystem and gives Apple a significant first mover advantage," Huberty wrote in a note to clients on Tuesday. "With the launch of ARKit, Apple now controls both the hardware upon which AR applications can be run and the software platform for which the third-party applications can be created."

Facebook, Apple and Alphabet are holdings in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells FB,AAPL or GOOGL? Learn more now.

Follow @TheStreet on Twitter for the Latest on Apple's Newest Products:

TheStreet Recommends

The HomePod has some rivals. 

"As a result, we expect much more widespread adoption of AR on the iOS system vs. Google Tango and ARCore (at first) as developers realize the potential for broad distribution across the iOS platform," she added. 

Apple issues uniform upgrades to new operating systems across all its devices, while Android faces the challenge of fragmentation. This means that Apple users are more likely to be exposed to new software, such as ARKit, which means developers might prefer to use ARKit over competing software if they know that their apps will gain greater exposure. Huberty noted that two-thirds of iPhone users upgraded to iOS 10 in the first thirty days after it was released, compared to low- to single-digit percentage adoption of Android 7.0 over a similar time period. 

AR is poised to be a high value market for tech companies. Huberty estimates the AR market could be worth as much as $404 billion over the next three years, driven by accelerated device upgrades, AR-related services and 3D-related smartphone components. She likened the value proposition to when Apple's App Store first launched in 2008 -- a pivotal moment for the smartphone ecosystem.

"While the iPhone introduced a user-friendly touch interface that revolutionized mobile phones, it was the App Store that allowed users to consume and create information in a way that was optimized for the smaller form factor, expanding the range of computing functions and therefore demand in the market," Huberty explained. "We see new camera technology along with Apple's ARKit as similarly accelerating both device upgrades and services growth."

Apple is also the first smartphone vendor to introduce 3D sensors in a mobile device, Huberty noted, which is the core technology that drives AR functionalities. 

More of What's Trending on TheStreet: