Artificial intelligence was at the heart of analysts’ concerns during Apple’s latest earnings call. But the company remains fairly discreet about its investments in this area, despite the upcoming release of Apple Intelligence. A caution that contrasts with the pharaonic spending of its rivals.
Apple Intelligence, the great hope
Apple Intelligence, which is set to integrate ChatGPT later this year, has high expectations. It could boost sales of iPhones and other products. But Tim Cook and his CFO Luca Maestri have carefully avoided questions about the rollout timeline and business impact.
Apple’s boss did acknowledge an increase in AI spending. In the last quarter, investments (not just for AI) reached $2.15 billion, a slight increase. A drop in the ocean compared to the colossal sums swallowed up by the competition. On the other hand, if Apple spends less than its competitors, it has been investing for much longer than the others. AI is far from being a novelty for Apple; it is the generative branch that is a real challenge for it.
Microsoft, Google and Meta all about AI
Microsoft spent nearly $14 billion in the quarter (+55% year-on-year), Alphabet (Google) $13.2 billion (+91%) and Meta $8.3 billion (+31%). These amounts were mainly devoted to building data centers loaded with Nvidia chips to train AI models. Moreover, these giants have revised their long-term environmental objectives downward following these huge investments in AI servers.
Mark Zuckerberg is taking on this bet: it is better to overinvest than to miss the train of generative AI, a key technology for the coming decade according to him. He also wants to prevent Apple from dominating the next technological revolution again.
Apple’s hybrid approach
But Apple plays a different tune. Unlike Amazon, Google or Microsoft, the brand does not have a cloud business and therefore does not need a disproportionate infrastructure. It also designs its own chips for iPhones and servers, which limits purchases to third parties like Nvidia.
Finally, Apple has adopted a “hybrid” approach: part of the expenses are shared with partners like OpenAI, transforming investments into operational expenses. The firm also rents cloud capacities from Amazon, Google and Microsoft.
With better-than-expected results and a stable stock, Apple’s AI strategy does not seem to worry the markets. But it will quickly have to prove that Apple Intelligence has nothing to envy its competitors despite more measured investments. Answer in the coming months.