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Apple’s efforts to narrow its artificial intelligence gap with its competitors through a partnership with OpenAI had little impact on Wall Street. The iPhone maker’s share price fell about two percent in after-hours trading on Monday.

On Tuesday morning, investors changed their minds and sent Apple stock up 6% to $205 per share, reported Forbes.

“Apple Intelligence” – the term was used around 60 times at Apple’s Worldwide Developers Conference on June 10, according to Wall Street Journal – involves a partnership with OpenAI’s ChatGPT. The goal is to breathe new life into Siri, Apple’s aging voice assistant.

Apple’s deal with OpenAI has enraged Elon Musk, who threatened to ban Apple devices from his companies – namely Tesla, SpaceX and X. Why? On June 10, Musk called the Apple/OpenAI deal “an unacceptable security breach.” CNBC reported.

Apple sees good times ahead. “We believe Apple Intelligence will be indispensable for the products that already play such an important role in our lives,” said CEO Tim Cook in his presentation, which diary noted.

Apple – which saw revenue fall 4.3% in the quarter ending March 2024 – needs new growth to boost its stock. Investors aren’t convinced the announcement will bring in the revenue it needs. Many analysts believe the OpenAI deal will further reduce iPhone demand.

What is Apple Intelligence?

Apple Intelligence aims to equip billions of iPhones with generative AI technology. The system will “result in a major upgrade for Siri,” the New York Times. The Just reported For example, Apple’s technology would perform the following tasks:

  • Proofread and make suggestions on what users write in emails, notes or texts;
  • Prioritize messages and notifications;
  • Answer user questions, create images and write software code;
  • Consider whether a rescheduled meeting would conflict with a user’s family commitments.
  • summarize audio recordings;
  • Allow users to create movies from photos by writing a description.
  • Clean up photos by removing distracting background images.
  • Reduce hacker risk by processing user requests on the iPhone rather than in a data center.
  • Run the service on an Apple-controlled cloud service using Apple semiconductors. and
  • Redirect user requests that Apple cannot handle to ChatGPT.

Apple will also revive the ailing Siri. The voice assistant does not recognize “various requests” and cannot speak because it follows every single command that Just wrote.

Siri will remember the context of a user’s request and reuse information in an image for a text application, Apple said. “For example, if someone asks about the weather in Muir Woods National Monument and later asks to plan a hike there, Siri now knows that the planned hike is in Muir Woods,” the company said. Just reported.

Siri will also help people fill out forms faster. How does this work? The assistant will find “an image of a user’s driver’s license” and extract the information to fill out a form on the user’s behalf. Just wrote.

Partnerships between major technology companies aim to prevent generative AI disruption

Apple’s high-profile deal with OpenAI underscores the difference between the dotcom boom and the generative AI boom.

During the dot-com boom—when 2,888 companies went public—startups crowded out incumbents. There have been no IPOs related to generative AI since November 2022, when OpenAI launched ChatGPT, according to my new book. Brain Rush: How to invest and compete in the real world of generative AI.

Instead, established companies enter into partnerships to avoid falling behind – and hope to generate additional revenue.

Partnerships are inherently risky. Their success depends on a strong level of mutual dependence and the right allocation of investments, revenues, operating costs and activities.

The partnership between OpenAI and Microsoft currently appears to be working well. However, the majority of Microsoft’s $13 billion investment is going into the software giant’s cloud services to train and run ChatGPT, noted Semafor.

Due to OpenAI’s heavy dependence on Microsoft, the two companies may ultimately go their separate ways as the ChatGPT provider becomes increasingly independent.

While the financial terms of the partnership between Apple and OpenAI are unclear, the collaboration appears to favor OpenAI over Apple. How so? Open AI gains access to 2.2 billion handheld devices from Apple, the diary reported.

OpenAI could monetize this by sharing in revenue—for example, the $20 per month it charges for ChatGPT Plus subscriptions. Technical.me reported.

Meanwhile, Apple isn’t bringing much new to the party. The iPhone is a 17-year-old product, and its sales fell 10% in the first quarter of 2024, according to the company.

A slight update to Siri doesn’t seem to me to be a reason for users to go out and buy new Apple devices.

In the meantime, Musk could cost Apple future device revenue. After all, he employs 171,000 people, according to Nova Richeand 186 million followers on X, Exploding topics reported.

Musk’s anger over the collaboration between Apple and Open AI led him to threaten to ban Apple devices from his companies. If Apple “integrates OpenAI at the operating system level,” Musk will ban Apple devices, CNBC reported.

Apple countered Musk by saying that its own AI is the standard feature and OpenAI is an optional feature. In response to a post by Cook, Musk said he would ban Apple devices if Cook did not decide to “stop this creepy spyware.” CNBC noted.

Will Apple Intelligence increase Apple’s revenue?

Analysts have differing views on whether Apple’s announcements will lead to faster revenue growth.

One analyst believes Apple Intelligence is extremely significant. “This is the biggest event for investors since the iPhone, because they need to incorporate AI into their products to be successful,” Gene Munster, managing partner at Deepwater Asset Management, told Just.

“Today was about showing that they are making AI a core competency and that they can deliver an AI experience that consumers want,” Munster added.

Other analysts believe that the new technology will encourage users to keep their existing devices longer – thereby reducing Apple’s sales.

“We will all get new iPhones at some point in the future, but we believe consumers will hold on to their devices longer to save money because there are no compelling features,” KeyBanc analysts said in a note to clients published in a Investing.com Report.

Another analyst expects the OpenAI partnership to slow Apple’s sales. The deal could be “initially revenue-dilutive,” Bernstein analysts said, according to Investing.comRevenue sharing could hurt Apple’s revenue because it “potentially drives migration away from traditional searches,” Bernstein added.

According to a fourth analyst, Apple Intelligence is bad news for the company’s iPhone sales and stock price. “The lack of a breakthrough AI product launch/software suite is likely negative for (near-term) iPhone demand as well as investor sentiment,” analysts at UBS said, according to Investing.com.

Apple’s stock has lagged rivals that have benefited from generative AI. Since November 2022, Nvidia stock has risen 770%, while Microsoft stock has gained 93%. This compares unfavorably to Apple’s relatively slow 48% market value gain since then.

Regardless of Tuesday’s earnings, Apple’s findings are not a reason to buy the company’s shares.

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