June 25, 2024

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Apple: The time of artificial intelligence is coming

Apple: The time of artificial intelligence is coming

For much of the past year and a half, Apple and CEO Tim Cook have been fielding constant questions from Wall Street analysts about their AI plans — all because the company known for its innovations doesn't have an AI story to tell.

After the company reported its quarterly earnings on Thursday, Cook insisted that Apple has a plan and will soon speak with specific details about its AI plans. “We continue to feel good about our opportunity in creative AI and plan to make significant investments,” Cook said in an interview with Reuters, noting that the company has spent $100 billion over the past five years on research and development.

Apple and others

Apple's competitors have spent equal or even relatively greater amounts on research and development during the same period, but they have also spent significant sums on building data centers to host AI services.

For example, Microsoft spent $14 billion last quarter, and Google subsidiary Alphabet was not far behind at $12 billion. While Meta Platforms told investors last week that it expects capital spending of up to $40 billion this year.

But Apple thinks differently. Its capital spending for all of 2023 was just over $10 billion.

Despite being the company that makes the most money selling consumer devices, it has paid a heavy price for that position for most of this year, with its shares falling 10% as investors worried the company was falling behind in the AI ​​race.

While shares of Meta, Google and Microsoft – which mainly make money from selling software or advertising services – have risen to record levels as the companies struggle to dominate the artificial intelligence scene.

What will he do with the data?

Apple hinted on Thursday that it would not follow suit. While it is expected to unveil new AI capabilities at its annual software conference next month and overhaul its production lines with AI-ready chips, Chief Financial Officer Luca Maestri said Apple investors should not expect a major change in the way the company handles capital expenditures.

In response to an analyst's question, Maestri pointed to the company's long-standing practice of sharing tooling costs with its suppliers, which has kept Apple's costs low and its cash generation low for more than a decade.

“We do something similar when it comes to data centers,” Maestri added. “We have our own data center and then we use capabilities from third parties. It's a model that has worked for us historically and we intend to continue in the same way in the future.”

This could also be the case for Apple, as it is still unclear whether AI features such as chatbots that run directly on the device will prompt users to buy new phones, tablets or laptops, which remain their largest source of revenue. And Apple's profits.

On the other hand, Ben Baharen, of Creative Strategies, explained to Reuters that while better processors could serve as an advantage for some users who need AI tools for professional use, these features may not lead to a boom in sales for ordinary consumers.

He added: “This will help increase sales, but we do not expect amazing results – we are tempering expectations and waiting.”

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source: after that