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Apple hasn’t exactly wowed consumers, but Apple Intelligence is the future of AI

In the keynote presentation for WWDC 2024 Apple (AAPL) has finally released its highly anticipated and long overdue blueprint for the AI ​​race with its new Apple Intelligence System.

At first, the launch didn’t seem to bring the fireworks that investors had expected. AAPL opened the day at $196.90 and closed at $193.12. Not exactly the stock boost that Tim Cook had hoped for.

While Apple Intelligence While the system included some cool features like a major upgrade to Siri, AI-powered content generation, and integration with ChatGPT, the debut lacked the kind of “revolutionary” product launch that investors have come to expect from Apple announcements over the decades.

But after a series of upgrades by analysts this morning, investors have changed their minds.

At the time of this writing, AAPL stock is up 6.5%!

But before this change, We have already seen the potential of Apple Intelligence to be the best AI in the world.

Narrowband AI systems like ChatGPT are the most popular AI tools on the market. And consumers want these narrowband AI systems tailored to them in their pockets. We believe Apple has built the most useful consumer AI application yet.

Humane tried it with its Humane AI Pin.

Rabbit tried it with the Rabbit R1.

Apple’s former design chief Jony Ive is trying his hand at OpenAI and is reportedly raising funds for an “artificial intelligence iPhone.”

Now Apple, a company uniquely positioned to develop a hyper-personalized AI assistant for your pocket, is introducing its AI, er, Apple Intelligence.

Will it usher in a new era of personal AI?

AI = Apple Intelligence

We left Apple’s keynote knowing exactly what it is not I will do.

Apple is not Developing AI to help companies make better products or market them more efficiently.

Apple is not Developing AI to help investment managers manage the risks of their portfolios.

Apple is not Creating AI to automate business tasks such as organizational work.

These are valuable AI applications, but Apple is not developing them.

Apple Intelligence aims to develop AI that helps billions of people perform everyday tasks more easily. This approach is potentially more valuable than any other AI application. Specifically, Apple is turning the iPhone into a hyper-personalized AI assistant. Remember Jarvis from Iron Man? Apple wants everyone to have a Jarvis in their iPhone. That’s what Apple Intelligence is all about.

Source: Anton_Ivanov / Shutterstock

Imagine if your iPhone was equipped with a customized AI model that was tailored to your needs, wants, characteristics, schedule, etc. This AI knows your favorite restaurants, the sports you follow, the news feeds you read, how you compose emails and texts, what music you listen to, what shows you watch, and more. It knows everything about you.

And it could help you with everything.

Having trouble choosing a restaurant for your Friday night date? Let your Apple Intelligence AI help you.

Not sure what movie you want to watch tonight? Let your Apple Intelligence AI help you.

Are you having trouble finding new music you like? Let your Apple Intelligence AI help you.

This is the future of Apple Intelligence – a future where AI helps you do everything on your phone a little easier.

Apple and OpenAI: Small steps today, big leaps tomorrow

Apple’s first steps in this area are small.

Yesterday, there were no Apple Intelligence announcements that left everyone open-mouthed and saying “Wow!”

The announcements were cool.

Siri is getting a major upgrade. It will pull data from multiple apps to perform cross-app actions, like taking a dinner reservation from an iMessage conversation with your mom and adding it to your calendar. Apple also announced AI-powered tools like Genmoji, which lets you create your own emojis using AI. The company also announced an upcoming integration with ChatGPT on all iPhones.

These are all cool announcements. None of them were groundbreaking announcements.

However, the lack of groundbreaking announcements yesterday should not be interpreted as meaning that Apple is not competitive in the AI ​​race.

First of all, Apple Intelligence requires at least an iPhone 15 Pro or Pro Max, and only 10% of Apple’s installed base owns those models. So it’s likely that Apple Intelligence and the convenience it brings will trigger an upgrade “supercycle” as consumers rush to buy the latest iPhones running Apple Intelligence. This is not unlike the upgrade supercycle Apple experienced when it released the iPhone 12 with 5G connectivity.

The last word

Apple has embarked on a thousand-mile journey with Apple Intelligence. Yesterday the company took the first step on this path. In the coming months the company will take many more steps. When the journey is complete, We believe Apple Intelligence will be the most transformative AI on the planet.

Think of all the data your iPhone collects every day: your Spotify or Apple Music streams, YouTube shows, news feeds, and messages. Apple has all the personal data needed to develop hyper-personalized AI. But data is only half the battle in developing great AI.

A great AI is like a great car – it needs a great engine and lots of fuel. Apple has the fuel because they have the data. But it doesn’t have a great engine. And that’s where OpenAI comes in. The company behind ChatGPT has the best AI models in the world. It has the best engine in the AI ​​race.

Apple confirmed yesterday that it is working with OpenAI to integrate ChatGPT natively into the iPhone via Siri. This collaboration is significant. Given Apple’s other announcements about Apple Intelligence, such as AI-powered content generation, it is likely that Apple will use OpenAI’s models throughout its system. ChatGPT is, after all, excellent at content generation.

With Apple’s data and OpenAI’s AI models, Apple Intelligence has the most fuel and the best engine in the AI ​​race. That’s why I believe Apple could actually win this race. I think Apple Intelligence could, over time, become the best AI in the world.

Apple’s entry into the AI ​​race, whether it wins or not, is a significant moment for the industry. Now everyone is involved. Apple was the last to break away from the big tech companies. Microsoft (MSFT), Amazon (Amazon), NVIDIA (NVDA), Teslas (TSL), Alphabets (GOOGLE)And Meta (META) have been fully committed to AI for several months. Now Apple is joining them. All major technology companies in the world are investing fully in AI.

This means you should probably go all out with AI, too.

At the time of publication, Luke Lango had no position (either directly or indirectly) in the securities mentioned in this article.

PS You can keep up to date with Luke’s latest market analysis by reading our Daily Notes! Check out the latest edition on your Innovation investor or Early stage investor Subscriber page.

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