For most of the past year and a half, Apple CEO Tim Cook has answered questions from Wall Street analysts about his AI plans amid complaints that the iPhone maker has no AI story, reports Reuters.
After the company reported its quarterly financial results on Thursday, Cook insisted that Apple will have concrete details about its AI plans, which it will talk about very soon.
“We continue to feel very optimistic about our opportunity in generative AI and are making significant investments,” Cook told Reuters in an interview, noting that Apple has spent $100 billion over the past five years on research and development.
Apple’s Big Tech competitors spent comparable or even higher amounts on R&D over the same period, but they also spent heavily to build data centers to host AI services.
Microsoft spent $14 billion on investments in the most recent quarter, and Google, part of the Alphabet group, is not far behind with $12 billion.
Meta Platforms told investors last week to expect capital expenditures of up to $40 billion this year.
Apple thinks differently. Its capital expenditures for all of 2023 were just over $10 billion.
Apple, which makes the most money selling consumer devices, has paid a price for that policy for most of this year, with its shares falling 10% as investors feared the company was falling behind in the AI race.
On Friday, Apple shares rose 6.4%, recovering some of the recent losses.
Shares of Meta, Google and Microsoft, which make money from selling software or advertising services, rose to record highs as the companies battle to dominate the emerging AI landscape, although investors also reacted to the high prices of the centers of data and specialized processors, necessary for training AI models.
Apple let it be understood on Thursday that it will not have the same direction. While Apple is expected to unveil new AI features at its annual software conference next month and update its product lines with AI-ready chips, CFO Luca Maestri said Apple investors shouldn’t expect a major change in the way the company manages capital expenditure.
Responding to an analyst’s question, Maestri noted the company’s long-standing practice of sharing tool manufacturing costs with its suppliers, which has kept Apple’s costs low and cash generation high for more than a decade.
“We do something similar in terms of data centers. We have our own data center capacity and then use capacity from third parties. It’s a model that has worked well for us historically and we intend to continue along the same lines in the future,” said Maestri.
It remains unclear whether AI features, such as chatbots that run directly on a device, will drive users to buy new phones, tablets or laptops, which remain Apple’s biggest source of revenue and profits.
Creative Strategies’ Ben Bajarin said that while better processors could serve as “a line in the sand” for some users who need AI tools for professional use, these features may not trigger a sales boom.
“It will be something that will help increase sales, but I don’t expect it to be a super cycle. You have to be careful to temper expectations,” said Bajarin.
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