Apple's approach to AI spending and deployment differs from that of its Big Tech competitors.

• Concerns have arisen that Apple is falling behind its rivals in the development of artificial intelligence products and services because the company has not been forthcoming about its pre-release plans.
• In recent years, Apple has acquired numerous AI startups and integrated embedded software into its updated devices, including smartphones, computers, watches, apps, operating systems, and Vision Pro VR headset.
• Cupertino's biggest advantage is its extensive user base of over two billion on the iOS platform, which presents a significant opportunity for leveraging machine learning.

Since 2015, Apple has acquired over 20 AI companies, including Emotient, Laserlike, Drive.ai, AI.Music, and WaveOne. These companies are not well-known to the general public, but their technologies have been integrated into Apple's products, such as smartphones, computers, and watches. Apple has also used these technologies in its streaming music and television services, operating systems, and various mobile applications. Additionally, Apple is planning to release the Vision Pro mixed-reality headset next year, which will likely incorporate these AI technologies as well.

Apple, based in Cupertino, has been tight-lipped about its AI acquisitions and strategy, including its internal R&D in AI, while its big tech competitors, such as Google, Microsoft, and Amazon, are more open about their generative AI chatbots and LLM platforms.

According to Dan Ives, Cook and Cupertino's approach is to remain silent until they make an announcement.

Apple's AI approach has a significant impact on its consumer-centric business model beyond just publicity.

Apple has targeted machine learning infrastructure while its rivals are focused on building stand-alone generative AI models.

Apple is acquiring top talent in each domain to apply machine learning techniques to specific consumer products, according to Brendan Burke, an emerging technology analyst at research firm PitchBook. This has led to a focus on consumer applications of AI, as well as operational techniques for machine learning deployment and edge devices, as well as limited bets on the future of deep learning and more horizontal technologies.

Apple, scheduled to release earnings on Thursday, declined to comment.

Apple is cautious when discussing its AI ambitions, whether it's during CEO Tim Cook's appearance on "Good Morning America" or in an earnings report call with analysts and investors in August. During that call, Cook stated that AI and machine learning are essential technologies that are integrated into every product Apple builds. He also mentioned that the company has been conducting research on various AI technologies, including generative AI, for years. Cook added that the company plans to continue investing, innovating, and responsibly advancing its products with these technologies, with the goal of improving people's lives. He stated that the company typically announces things as they come to market, and that's their standard operating procedure, which he would like to maintain.

The latest iPhone and Watch models demonstrate Apple's AI capabilities. The iPhone 15 includes AI technologies such as personal voice, which allows users to synthesize their voice when speaking words typed in FaceTime and phone calls, and live voicemail, which provides real-time transcription of messages. The camera on the iPhone 15 uses machine learning AI to distinguish between people and animals in the frame. The Apple Watch Series 9 and Ultra 2 feature AI in the double-tap function to simplify task performance, a brighter display, a smarter Siri, and advanced health monitoring.

The spatial computer, which is built into AI and Vision Pro, will allow users to create avatars of themselves using machine learning techniques. They will be able to use these avatars to do things together, such as watch movies, browse photos, or collaborate on presentations.

Despite the progress of its app by app and device by device, Apple has not been immune to criticism that it is late to the game.

Laura Martin, a tech analyst at Needham, believes that Apple is lagging behind its big tech competitors in the field of generative AI. Despite this, she believes that Apple's strong ecosystem and economic model, which are focused on machine learning, will enable the company to continue growing in the future.

Microsoft's recent earnings report demonstrated that the early edge in generative AI is benefiting its rivals. However, Apple has a unique advantage over its tech competitors: its world-leading installed base of more than two billion users running its iOS operating software on devices.

Bullish analysts believe that the competition for Apple is not directly against the generative AI platforms being pursued by Microsoft, Google, and Amazon. Instead, they see it as a parallel development process. Comparisons being made today to the first wave of cloud adoption and generative AI ecosystems now being referred to as Cloud 2.0 suggest that it may be less of a race than a collaborative effort. While Amazon Web Services, Microsoft Azure, and Google Cloud have dominated the market, Apple has not made any significant moves in this area.

Ives stated that they will not view AI from the outside looking in, but will become a major player in AI, despite the perception that they are late to the game. He added that they believe they are on the brink of introducing an AI App Store within the next year.

The billions being spent on AI

Ives believes that Bloomberg's report of Apple spending $1 billion a year on generative AI is an underestimate, and he expects the company to spend as much as $5 billion a year on AI. He also states that Apple has already spent $10 billion on AI research and development to create a foundation for developers to build AI apps, which is comparable to Microsoft's spending. Ives adds that the company's goal is to create an AI App Store, where they can monetize in a historic way.

The growth of Apple's services business, which is now a $100 billion revenue stream on its own, presents a growth opportunity. Within an AI App Store, the opportunities can range far beyond core Apple offerings like Music, to a wide variety of health and fitness apps, for example, and in the end offer an additional $5 billion to $10 billion a year in services revenue, by Ives' count.

Cook's mention of generative AI to analysts sparked speculation about what Apple would do in the highly competitive field, with Microsoft leading the way through its involvement with OpenAI and ChatGPT, and its Bing AI chatbot. Google's Bard bot and Meta's LLM-based virtual assistant, Meta AI, also play a role in this field.

In July, Bloomberg reported that Apple was developing AI tools to compete with those bots using its own LLM, known as Ajax, and had created an internal chatbot called Apple GPT.

In August, the Financial Times reported that Apple was expanding its knowledge in generative AI by recruiting numerous individuals in California, Seattle, Paris, and Beijing to work on LLMs. According to Apple's job postings, the company is seeking candidates to join a team of researchers and engineers with a successful track record in various machine learning techniques, including generative AI models.

Apple's adherence to data privacy and design excellence may hinder their progress in generative AI, according to Burke. However, he believes that Apple will only release products that meet their internal quality standards and prioritize safety, which may slow down their deployment speed. Burke predicts that Apple will wait until any platform technologies are truly beneficial to their ecosystem before releasing them.

Burke stated that it is reasonable to assume that Apple will continue to invest in AI, either through acquisitions of startups or partnerships with developers. He pointed out that Amazon's recent $4 billion investment in Anthropic, a startup that launched an AI chatbot called Claude 2, could put pressure on Apple to work with leading startups to supplement its internal R&D efforts. Burke added that startups' state-of-the-art results with LLMs and new image- and video-based features could be relevant to Apple, making it a valid complement to its current efforts.

Amazon will invest up to $4 billion in AI startup Anthropic. Earlier reports of the investment were incorrect.