Apple started its Developers Conference with its long awaited, long overdue AI development announcements yesterday.
These were the key points
Emphasis on privacy – Majority usage of AI on device but cloud available as well for more computing power, they would be using their own cloud service instead of Google or Microsoft. Apple will be hosting its own Cloud AI services on its own Apple Silicon servers to counter Microsoft’s cloud AI.
Strategy was integration and not an add on – To show AI integrated into the apps and products you already use—rather than powering a tacked-on perk or stand-alone chatbot.
Partnering with Sam Altman’s OpenAI – Not developing their own artificial intelligence from scratch, instead partnering with Sam Altman’s AI, but crucially it will be integrated. Using a third party for AI could be a smarter move (cheaper, less Capex, fewer failures) – or simply they were too far behind.
Integration Apple’s strongest differentiation was and remains integrated hardware and software product, “System on chip” – basically Apple created and designed silicon with its own operating system and hardware, it’ll be interesting to see how well it is integrated.
The adoption is companywide and includes iOS 18, iPadOS 18 and MacOS Sequoia, Siri,
Some new features, and a lot of catching up – – several features are in Google and Samsung.
Playing Catch Up – Writing tools, Voice transcription, Image generation and Notifications, these all exist, and are now available from Apple Intelligence.
Differentiators
The key differentiator here is that Apple Intelligence will also make it easier to search through our existing data – for example, What’s exciting here is the blending of AI with the photos we’ve already taken, and prioritize our notifications. Like other chatbots, you can now text with Siri. But unlike other chatbots, Siri has access to all your Apple stuff. When all the promised updates arrive, it will be able to see what’s on your screen and work across apps. “Add this address to his contact card.” “Text yesterday’s picnic photos to my mom.” Things like this make total sense to a human but up until now have been out of Siri’s reach. The thing that really elevates Siri is its new friend, ChatGPT. When you ask Siri to do some things it doesn’t know how to—say, come up with dinner ideas based on your recent grocery haul—it asks your permission to check with an integrated version of OpenAI’s bot. However, If Apple can pull off what it showed and convince people that Siri is no longer painfully stupid, it might be a tech miracle. That’s a big if. The company has a decade long history of underwhelming Siri improvements.
If you get a chance watch Joanna Stern’s video in the Wall Street Journal.
Apple AI analysis: Impact on the company’s business and stock.
Much needed, frankly regardless of much this helps Apple, if they hadn’t done this it would have hurt them really badly.
Apple’s widest moat has been its integration unlike its competitors, for example you have Windows operating, Intel Silicon and Dell hardware – the Wintel systems for the mass market competing on price. Or the Samsung phones with the Android operating system. Apple’s was always designed to be one seamless product from scratch and that’s how they got their premium pricing and loyal customers.
They continue to emphasize integration and privacy with AI, a big plus.
I think overall, this will help and Apple is going add on features with each new iPhone or Mac version and increase sales, which were stalling for the past three years.
For a lot of people, yes may be underwhelming and just catching up for the regular Apple user, it would be a convincing argument to at least stay with Apple and possibly upgrade.
A core holding: I’ve bought and held Apple for several years now, and usually buy on declines, the last buy call I had made was around $170, and will add if there are unusual or large dips, this will remain a core holding for at least another 5 years. Apple is not a big mover but I’m very, very confident of at least 10-12% a year, plus it works well as a defensive stock too in bad times.
