For much of the last year and a half, Apple CEO Tim Cook has fielded questions from Wall Street analysts about his artificial intelligence plans, complaining that the iPhone maker doesn’t have an artificial intelligence story to tell.
After the company reported quarterly earnings on Thursday, Cook insisted that Apple would provide specific details about its artificial intelligence plans soon.
“We remain hopeful about our opportunities in generative AI and are making significant investments,” Cook told Reuters in an interview, noting that the company has spent $100 billion on research and development over the past five years.
Apple’s Substantial Tech rivals spent comparable or even greater amounts on research and development over the same period, but they also spent significant resources building data centers to host artificial intelligence services.
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Microsoft spent $14 billion on capital expenditures in the most recent quarter, with Alphabet’s Google coming in close at $12 billion. Last week, Meta Platforms told investors it expects capital spending of as much as $40 billion this year.
Apple thinks differently. Capital expenditure for all of 2023 was just over $10 billion.
Apple, which makes most of its money selling consumer devices, has paid the price for this attitude for much of the year, with its shares falling 10% on investor concerns that the company is falling behind in the AI race. Shares of Meta, Google and Microsoft – all of which make money selling software and advertising services – have soared to record highs as the companies struggle to dominate the emerging artificial intelligence landscape, even as investors also shudder at skyrocketing prices data centers and specialized processors required to train artificial intelligence models.
Apple suggested Thursday that it won’t operate the same tactic. While Apple is expected to showcase modern AI features at its annual software conference next month and modernize its product lines with AI-enabled chips, CFO Luca Maestri said Apple investors shouldn’t expect huge changes in the way how the company handles capital expenditure.
In response to an analyst’s question, Maestri pointed to the company’s long-standing practice of sharing tooling costs with suppliers, which has kept Apple’s costs low and boosted cash generation for more than a decade.
“We’re doing something similar on the data center side,” Maestri said. “We have our own data center and then we operate third-party computing power. This is a model that has worked for us in the past and we plan to continue doing the same in the future.”
That could be just as well for Apple, since it’s unclear whether AI features like chatbots that run directly on the device will encourage users to buy modern phones, tablets or laptops, which remain Apple’s biggest source of revenue and profits.
Innovative Strategies’ Ben Bajarin said that while better processors may be a “line in the sand” for some users who need artificial intelligence tools for professional operate, those features may not spark a sales boom.
“It will be something that will assist drive sales, but I don’t expect it to be a supercycle,” Bajarin said. “You have to be careful to temper expectations.”
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