Apple seeks alternative AI strategy

by Stephen Nellis

(Reuters) – For almost a year and a half, Apple CEO Tim Cook has had only one response to analysts: his group has so far nothing to say about intelligence artificial (AI).

But change of tone on Thursday: after the publication of Apple’s quarterly results, he insisted on the fact that the Apple brand would very soon have concrete elements to communicate on its AI projects.

“We continue to be very optimistic about our opportunities in generative AI and we are making significant investments,” the Apple boss said in an interview with Reuters, noting that the company has spent 100 billion dollars over the last five years in research and development (R&D).

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Apple’s big tech rivals have spent comparable amounts, if not more, on R&D over the same period, but they have also invested heavily in building data centers to house data services. AI.

Microsoft spent $14 billion in the last quarter in terms of investment, while Alphabet subsidiary Google invested $12 billion. Meta Platforms told investors last week it plans to invest up to $40 billion this year.

“THINK DIFFERENT”

At Apple, whose slogan was for a time “Think different”, investment spending over the whole of 2023 amounts to just over $10 billion.

The group, which generates the majority of its turnover by marketing consumer devices, has been sanctioned on the stock market since the start of the year, with a fall of almost 10% of the stock, investors fearing that the society falls behind in the AI ​​race.

The shares of Meta, Alphabet and Microsoft, whose economic model is essentially based on the sale of software or advertising services, have reached record levels against a backdrop of enthusiasm for AI.

The stock market frenzy around AI, however, appears to have subsided recently due to the cost of necessary investments in data centers and those of specialized processors for training AI models.

Apple suggested on Thursday that it would not follow the path of its competitors, as its chief financial officer, Luca Maestri, told investors not to expect a radical change in the way the group manages its capital spending .

Apple is expected to unveil new AI features at its annual developer conference scheduled for next month. The iPhone maker will also update its products with dedicated AI chips.

Responding to a question from an analyst, Luca Maestri recalled that Apple has a long-standing habit of sharing the costs of production tools with its suppliers, which has allowed it to keep its costs low and its generation cash flow at a high level for over a decade.

“We do it the same way for data centers,” he said. “We have our own capabilities in the data centers and then we use third-party capabilities. This is a model that has always worked well for us and we plan to continue this in the future,” he said. he explained.

This approach could suit Apple because it’s unclear whether AI features like chatbots running directly on a device will drive consumers to buy new phones, tablets or laptops, which remain the primary source of income and profit for the group.

According to Ben Bajarin, an analyst and managing director at Creative Strategies, while better processors can serve as a starting point for some users who need AI tools for professional use, such features should not be enough to cause a jump. Sales.

“This is something that will help increase sales, but I don’t expect it to be a super cycle,” he said. “We must be careful to temper expectations,” he added.

(Reporting Stephen Nellis in San Francisco; French version Claude Chendjou, editing by Sophie Louet)