Apple is under pressure to demonstrate its AI capabilities following the impressive events showcased by OpenAI, Google, and Microsoft.

• Apple long avoided using the acronym AI when talking about its products.
• This year, there is a growing demand for Apple to incorporate artificial intelligence technology into its products, following the revelations of Microsoft, OpenAI, and Google's work in the field.
• According to Dan Ives, an analyst at Wedbush, the AI strategy is the key element that is missing from the growth equation at Apple.

Apple has started using the acronym AI to describe its products.

The recent rise in generative artificial intelligence, initiated by OpenAI in late 2022, has been the most significant development in the tech industry. This has led to a $3 trillion market cap for chipmakers and a significant shift in priorities for companies such as Microsoft, Google, and Amazon, all of which are actively integrating the technology into their core services.

What the iPhone maker has in store is now desired by both investors and customers.

Apple's Worldwide Developers Conference (WWDC) is set to take place on Monday at its Cupertino, California campus, with CEO Tim Cook hinting at "big plans" and a new approach for the company that typically keeps product releases under wraps.

Apple's WWDC event, which takes place annually, is not typically a significant draw for investors. On the first day, the company unveils updates to its iOS, iPadOS, WatchOS, and MacOS software in a two-hour videotaped keynote presentation hosted by Cook. This year, the event will be held at Apple's headquarters. Following the presentation, app developers attend a week of parties and virtual workshops to learn about the new Apple software.

Apple unveils software that will be available on iPhones, allowing developers to update their apps. The focus is on the software rather than new hardware products.

This year, the most hyped acronym in tech will be the focus of everyone's attention.

What AI features can make the iPhone more competitive against Android rivals and how can Apple justify its investment in developing its own chips with over 1 billion iPhones in use?

Companies with a clear AI strategy and vision have been rewarded by investors. Nvidia, the leading manufacturer of AI processors, has seen its stock price triple in the past year. Microsoft, which is actively integrating OpenAI into its products, has experienced a 28% increase in stock value over the same period. In contrast, Apple has only risen 9% and has been surpassed in market cap by both Nvidia and Microsoft.

"According to Dan Ives, an analyst at Wedbush, the upcoming event is crucial for Cook and Cupertino as it marks the most significant occasion in over a decade. The AI strategy is the key to Apple's growth, and this event must be a standout, not just a shrug-the-shoulders occasion."

Executives, including software chief Craig Federighi, will likely discuss the practical applications of Apple's AI, the decision of whether to run it locally or in large cloud clusters, and what should be included in the operating system versus distributed through an app.

Apple's marketing for over half a decade has emphasized user privacy, and attendees will likely want to know how the company can deploy its data-hungry technology without compromising this key issue.

"According to Gil Luria, an analyst at D.A. Davidson, at WWDC, it is predicted that Apple will reveal its long-term strategy regarding the integration of generative AI across its range of personal devices. Luria believes that the implementation of generative AI in Apple's ecosystem has the potential to significantly impact the company's business, with the opportunity to reach billions of consumers."

Upgrading Siri

ChatGPT-4o, a voice mode for OpenAI's AI software, was unveiled last month.

During a brief demonstration, OpenAI researchers communicated with the ChatGPT app on an iPhone, and the bot was able to perform impressions, speak fluently, and even sing. The conversation was quick-witted, and the bot offered advice. In subsequent live event demos, the bot showcased its abilities in singing, teaching trigonometry, translating, and telling jokes.

Apple's Siri, which debuted in 2011, has gained a reputation for not being useful due to its rigidity and limited ability to answer a wide range of queries. This is partly because it is based on older machine learning techniques.

There are reports that Apple is considering partnering with OpenAI to enhance Siri's capabilities next week. Additionally, the company has been exploring licensing chatbot technology from other companies, including Google and Cohere.

Apple declined to comment on an OpenAI partnership.

Apple's new Siri will not compete directly with fully-featured chatbots but will enhance its current features and refer queries that can only be answered by a chatbot to a partner. This is similar to how Apple's Spotlight search and Siri work now, where the system tries to answer the question but turns to Google if it can't. This agreement is part of a $18 billion per year deal with Google.

Apple may avoid a complete partnership with OpenAI or chatbot due to the possibility of a faulty chatbot causing negative publicity and contradicting the company's focus on user privacy and control over user data.

Citi analyst Atif Malik stated in a recent note that data security will be a significant advantage for the company and they are expected to discuss their privacy initiatives during the WWDC.

Apple's privacy principles may be violated by OpenAI's technology, which is based on web scraping and ChatGPT user interactions to improve the model.

OpenAI CEO Sam Altman recently faced criticism for the inaccuracies and deception of large language models, like when Google's search AI mistakenly stated that President Barack Obama was the first Muslim president. This conflict is the kind that Apple executives try to avoid.

Efficient vs. large

Big server farms with Nvidia processors and terabytes of memory are now the go-to for AI computations outside of Apple.

Apple, unlike other companies, wants its AI features to run on its own chips, which are superior for running AI models, on iPhones, iPads, and Macs that operate on battery power.

Cook stated to investors in May on an earnings call that we believe in the transformative power and promise of AI and that we have advantages that will set us apart in this new era, such as Apple's seamless hardware, software, and services integration, our groundbreaking Apple Silicon with our industry-leading neural engines, and our unwavering focus on privacy.

JPMorgan analyst Samik Chatterjee wrote in a note this month that Apple's WWDC keynote presentation will emphasize on-device features and GenAI models to enhance those features.

Apple and Microsoft are both researching efficient language models that can run on phones. One of Apple's models, "OpenELM," has 1.1 billion parameters, which is significantly smaller than OpenAI's 2020 GPT-3 model with 175 billion parameters and even smaller than Llama, one of the most widely used language models, with 70 billion parameters.

Apple's researchers demonstrated that efficient models can perform well on a MacBook Pro laptop equipped with the M2 Max chip, without requiring a cloud connection. This can enhance response speed and ensure privacy, as sensitive queries can be answered on the device itself rather than being sent to Apple's servers.

Apple's software could offer features such as generating new emojis, summarizing missed text messages, completing code in Xcode, and drafting email responses, as reported by Bloomberg.

Bloomberg reported that Apple could potentially enhance its data centers' processing capabilities for AI queries by utilizing its M2 Ultra chips.

Green bubbles and Vision Pro

WWDC won't strictly be about AI.

Customers desire enhanced software and novel applications, as the company has over 2.2 billion devices in use.

Apple's adoption of RCS, an upgrade to the older SMS system, could improve its messages app. The app currently diverts texts between iPhones to its own iMessage system, displaying conversations as blue bubbles. When an iPhone texts an Android phone, the bubble is green. However, many features such as typing notifications aren't available.

Google spearheaded the development of RCS, incorporating encryption and other enhancements into text messaging. Recently, Apple announced its intention to integrate RCS with iMessage. The unveiling of iOS 18 would be the opportune moment to demonstrate the advancements made.

The conference will mark the first anniversary of Apple's unveiling of the Vision Pro, its virtual and augmented reality headset, which was launched in the U.S. in February. Apple may reveal its plans to expand to additional countries, such as China and the U.K.

Apple announced in its WWDC presentation that the Vision Pro would be the focus of the event. Although the Vision Pro is currently running on its first version of the operating system, core features such as Persona videoconferencing simulation are still in beta.

At the event, some of Apple's virtual sessions will be available in a 3D environment for users with a Vision Pro.

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