In the year and a half since OpenAI introduced its revolutionary large-scale language model ChatGPT, investors have been putting pressure on all Big Tech companies to prove they can keep up. Most tech giants have responded by announcing a series of AI-related initiatives, which have received mixed reactions on Wall Street.
Microsoft was valued at $54 billion last week due to strong results from its cloud business. Cloud businesses are growing rapidly, thanks in part to enterprise customers' AI enthusiasm. In contrast, Facebook's parent company Meta has been spending heavily on building data centers and buying servers to prepare for an AI-centric world, resulting in its stock price plummeting and losing its market capitalization. More than $130 billion has been shaved off.
But there's one company that investors are eagerly waiting to learn more about its AI efforts. Apple. And all signs point to a little more wait as the company prepares to report its second-quarter results on Thursday.
Apple matches rivals' ambitions, including Meta's open source large-scale language models, Microsoft's workplace assistant, Google's integration of AI into search, and Amazon's service for building customized large-scale language models for businesses. has not yet disclosed its AI initiatives. It's based on something that already exists. Apple executives have repeatedly dodged questions about the matter in recent earnings conferences, with CEO Tim Cook saying at the company's latest earnings call in February that they “don't want to talk about it in front of us.” Ta.
During the call, Cook hinted at a big AI-related announcement later this year. But shareholders shouldn't get their hopes up about any major new AI products this week. Analysts from at least five investment banks and research firms don't expect any big news until Apple's Worldwide Developers Conference in June, according to a research note. And, according to equity research firm CFRA, the new products may not actually be available to customers until the fall, several months later.
“All that matters this year is clarity on our commitment to generative AI,” CFRA analysts wrote, adding that they expect June's Apple conference to be the most important event in years. . Apple has been “historically slow to adapt to change, but times are changing and management needs to recognize that the company needs to be more nimble in a world being disrupted by GenAI.”
The lack of an AI plan has been a factor in Apple's stock slump this year. So far, the company's stock price has fallen 8% since early January, trading at $170 per share on Tuesday. Meanwhile, the Nasdaq is up 5% over the same period.
Analysts have various predictions about what kind of big announcement Apple expects to make. Many expect some of the news to focus on the iPhone 16, which is expected to debut in September.
Goldman Sachs envisions a version of its digital assistant, Siri, that uses large-scale language models to better understand what's happening on a device's screen and respond to prompts more effectively than it currently does. analysts said in an April 12 report. Other potential AI features include predictive text for iMessage, photo and video editing tools, AI-generated playlists for Apple Music tailored to individual user preferences, and different audio than what's already transcribed. These include tools to summarize recordings. Voicemail, according to Goldman Sachs.
The AI-powered iPhone 16 is exactly what Apple needs to rebuild its mobile phone business after months of declining sales due to weak demand in China, investment firm Wedbush Securities said in a research note on Tuesday. He said it could become something. As competition between U.S. and Chinese technology companies intensifies, especially over microchips needed for AI, Chinese consumers are turning away from iPhones and toward domestic alternatives.
Last quarter, Apple's total sales in Greater China, which includes China, Hong Kong and Taiwan, fell 13% from a year earlier. Analysts are keeping an eye on Thursday's China sales, and CFRA said in a research note that it expects “performance to be challenging.”
Asset management firm Baird shared a different vision for Apple's AI. Analysts said in a Feb. 14 note that they expect the company to debut a better search engine that can compete with Google. Google has dominated the search space for more than two decades, but its leadership has been challenged by the prospect of large-scale language models replacing traditional search. OpenAI is reportedly developing a search product to compete with Google, and Baird said he would not exclude Apple from the search race.
Whatever its AI ambitions, Apple will be burdened by the high costs associated with AI infrastructure, including chips and data centers. Those costs hit Meta hard in last week's earnings, as the company announced that AI-related capital spending will reach $40 billion this year and could continue to rise over the next few years. Meta's stock price plummeted 17% in the hours following the announcement. Meanwhile, Google's parent company Alphabet doubled its capital spending last quarter to $12 billion from a year earlier, but avoided a steep drop in its stock price by placating investors with dividends and a stock buyback program.
Apple typically spends $10 billion a year on capital expenditures, and has recently increased its spending on AI servers, according to Goldman research. To ease the pain, Goldman and CFRA expect Apple to increase its current dividend on Thursday and undertake a long list of more than $90 billion in stock buybacks.