Apple’s AI evolution is not quite a revolution

Apple CEO Tim Cook speaks during Apple's annual Worldwide Developers Conference (WDC) in Cupertino, California on June 10, 2024. (Photo by Nic Coury / AFP) (AFP)
Apple CEO Tim Cook speaks during Apple's annual Worldwide Developers Conference (WDC) in Cupertino, California on June 10, 2024. (Photo by Nic Coury / AFP) (AFP)

Summary

The iPhone maker’s late entry to the AI race comes with many features similar to Microsoft’s and Google’s offerings, which might curb investors’ recent enthusiasm.

At least Apple has three more months to try again.

The maker of the iPhone, iPad and Mac computer finally lifted the veil Monday on its first generative-artificial-intelligence offerings. As expected, the new capabilities, known broadly as Apple Intelligence, will be tightly woven into the company’s operating system updates coming later this year. Also as expected, they will include a major upgrade for Siri, Apple’s 12-year-old digital assistant that has often been derided as something less than intelligent.

Apple has long had a hard time springing any surprises at its events, given the company’s scale and the immense media and investor interest in its direction. But the stakes were especially high this time around. The specter of Apple’s entry into the AI race has consumed its trillion-dollar rivals for the past 18 months.

That sparked some excitement among investors. Apple’s shares have lagged behind those of its big tech peers over the past year, but the stock jumped 14% between its fiscal second quarter report last month and the start of its Worldwide Developers Conference on Monday. That is the biggest gain the shares have made in that period in a decade.

But many of the new features Apple demonstrated Monday—such as image search and help composing emails and messages—looked familiar to those already offered by new AI tools from Microsoft and Alphabet’s Google. Apple also made it clear that the AI services announced Monday—including access to the latest ChatGPT version from OpenAI—will be free to use. That leaves open the question of just how the company will generate additional revenue from the latest technology.

Also unclear is what the OpenAI partnership will cost Apple given the expensive nature of AI computing and OpenAI’s strong lead in the space. Apple’s shares slipped nearly 2% by the close of trading Monday, which is the worst drop the stock has seen following the kickoff of its Worldwide Developers Conference since 2010.

Apple’s AI debut was always going to be a complicated one. Unlike peers that have already made forays into the technology, Apple generates the bulk of its business through sales of devices. And the company said Monday that many of its new AI features will be processed on-device, as opposed to relying on cloud-computing networks. That makes Apple’s hardware products a key part of its AI strategy. But those products very rarely make a debut at the company’s developer conferences, which typically are geared toward coming updates of the operating systems that power its devices. New iPhones—Apple’s most important product line—are typically unveiled in early September.

Hence, there is a good chance Apple is keeping some of its AI powder dry until then. The coming iPhone cycle is an important one after three consecutive years of weak sales. And AI might not be the easiest sell to prospective iPhone buyers. In a report Monday, UBS analyst David Vogt cited a recent survey of smartphone users that found only 27% of those outside of China are indicating interest in a device with generative AI capabilities. Price and privacy were cited as the highest areas of concern.

Apple’s credentials in privacy are solid enough. And the company’s marketing prowess has also proven out even during weak iPhone cycles, since Apple has been able to move more users to more expensive Pro versions of the iPhone, which sport better chips and cameras. Upselling AI will need to be Apple’s next big thing.

Write to Dan Gallagher at dan.gallagher@wsj.com

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

MINT SPECIALS