Why Apple’s AI Strategy Matters More Than Ever

[0:04] Apple's first 50 years were defined by iconic hardware. [0:09] Products that changed how people worked, communicated, and lived. [0:13] Very few companies have reached this 50-year mark, let alone set the gold standard [0:17] across multiple eras of technology, from personal computing to the smartphone. [0:22] But the real question now, in the age of AI, is can Apple hold its dominance or will it go to someone else? [0:29] What is the weather like today? [0:32] Here's the forecast for today. [0:35] It is that easy. [0:36] In 2011, Apple looked early. [0:40] Siri was the first mainstream voice assistant, debuting years before Google Assistant and Amazon Alexa. [0:46] But as AI became the defining technology of a generation, [0:50] Apple failed to turn that early advantage into lasting leadership. [0:54] They basically blew a five-year lead. [0:57] It was too soon. The technology wasn't ready. [0:59] And so LLMs are bringing that now. [1:01] Meanwhile, Google built Gemini, OpenAI built ChatGBT, [1:05] Anthropic built Claude, [1:07] and Siri. [1:07] Despite reaching more than a billion users, [1:10] never evolved into the platform that its creators envisioned. [1:13] That's the hardware company mindset in action. [1:17] We would kill to have the technology back then that exists now. [1:21] So there are no further technical barriers to any part of the Siri vision that we had from the old days. [1:27] In the 20-plus years that I've been investing and analyzing this company, [1:31] this is the biggest delay that they've had by orders of magnitude. [1:35] Now Apple is making its biggest bet yet, [1:37] turning to a longtime rival to power a revamped Siri. [1:41] They made it clear they don't want to build the brain. [1:43] They want to leverage the brain. [1:44] Apple has, I think, recognized that they need partners for AI. [1:49] I don't think you could find any AI hyperscaler who has more data [1:54] that would be particularly useful for the kinds of things Apple is interested in than Alphabet Google. [1:59] Apple today needs to catch up, and they're working very hard to do that. [2:03] They are at a fork in the road when it comes to their products being made. [2:06] They're at a fork in the road when it comes to their products being meaningful over the long term [2:08] because of powering an AI digital assistant. [2:11] If they don't solve that, somebody else will, [2:14] and that could cause a very big company today to be much smaller in the future. [2:18] Apple has to under-promise and over-deliver and stop trying to say everything's AI ready. [2:24] Apple is, buy it today and it works. [2:27] It's not a promise of the future. [2:28] It's a promise of today. [2:30] Apple's rise was built on great hardware. [2:45] It revolutionized the tech world, bringing the personal computer to the masses. [2:49] I had wanted a computer my whole life. [2:51] The huge mainframes, switches and lights all over the front panels. [2:54] And I had built one of those of my own design. [2:57] So then I sat down and I wanted to make things more human. [3:00] And then Steve Jobs came into town. [3:01] I told him, you've got to come and see this, see the excitement. [3:05] That's when Steve said, let's start a company. [3:07] And we formed that little partnership on April 1st, 1976. [3:11] Steve Jobs was a product visionary who knew what to build and when. [3:15] He introduced iconic technology, the Mac, iPod, the iPhone. [3:19] Today, Apple is going to reinvent the phone. [3:24] He was just totally focused on product. [3:26] He was an extraordinarily intense person and he was very, very clear about what he wanted. [3:31] He wanted the best quality products. [3:35] Steve was very clear that the iPhone was going to be Apple's legacy beyond his lifetime. [3:41] And Tim took that and built it into a incredible powerhouse that is unstoppable. [3:49] Apple declined to make any one of these products. [3:50] Apple declined to make any one of these products. [3:50] Apple declined to make any one of these products. [3:50] Even at 50, Apple would rather let the products speak for themselves. [3:57] But AI demands a different playbook than hardware. [4:00] It requires massive data, rapid iteration and a willingness to ship imperfect products [4:05] that improve over time, a style that comes more naturally to Google than to Apple. [4:10] So the question hanging over the company at 50 is really whether the culture that produced [4:15] the iPhone can adapt to an era where the product is never truly finished. [4:20] Tim did a tremendous job of taking it to the next level. [4:23] I think in the world of AI, it's going to need a new thought, leadership. [4:28] The fact that Apple's lived through a couple of transitions, [4:31] and the very first one, which was the most meaningful, [4:34] was moving away from centralized computing to personal computing. [4:37] And that even became even more fine-grained with mobile computing, [4:40] where we actually have things in our pockets, not just in our desktops. [4:43] Having survived those transitions or actually enabled them, [4:46] Apple is probably wary of centralization once again when it comes to AI. [4:58] Apple got a head start with Siri and let it slip. [5:01] Siri wasn't created by Apple. [5:03] The technology was built by Stanford Research Institute cohorts [5:06] Dag Kitloss, Adam Scheier, and Tom Gruber. [5:09] In early 2010, Siri launched as an app in the Apple Store [5:13] and caught the attention of Steve Jobs. [5:15] Steve Jobs tried it a few weeks later, called us up unannounced. [5:20] We went to his house. [5:21] And essentially... [5:23] He wanted to buy the company. [5:24] We weren't really ready to sell. [5:26] He called me 34 days in a row. [5:29] He's calling me at midnight. [5:30] Steve Jobs had been tracking AI for a decade before Siri. [5:34] What did he see in your demo specifically [5:36] that made him think that you'd crack the code here? [5:39] Apparently, a bunch of people ran up and showed it to him. [5:42] And his comment was, [5:45] this is the first time that I saw somebody crack AI. [5:49] He had never seen anything like that before. [5:51] Siri launched with the iPhone 4S in 2011. [5:54] But Jobs didn't live to fully realize his vision for what the voice assistant could be. [5:59] Steve literally was fighting to make sure that he was there to see the Siri launch. [6:05] He died the next day. [6:06] Siri was just too young and it didn't get that attention that it needed to be able to be the vision and the execution that Steve thought it should have been. [6:17] Siri got faster and more reliable over the years, but the scope of what it could actually do for users barely expanded. [6:24] In 2018, Apple recruited John Giandrea, one of Google's top AI leaders, to accelerate its efforts. [6:30] But progress remained slow. [6:32] They lost a little bit when Steve died and they worked to make Siri better, technically. [6:38] But I also think that, you know, the number of things, for example, that Siri could do for you really never went anywhere. [6:45] Here's what's coming up in the NBA for today. [6:47] Investors have been disappointed for the broader part of two and a half years. [6:52] They missed AI and have missed Siri. [6:53] They missed AI and have missed Siri. [6:54] They missed AI and have missed Siri. [6:54] They missed AI and have missed Siri. [6:54] They missed it even before that. [6:55] Then in 2022, OpenAI launched ChatGPT. [6:58] It blew Siri out of the water and completely changed what people thought was possible with AI. [7:04] Two years later, Apple partnered with OpenAI and launched Apple Intelligence. [7:08] It was the company's first major AI push, which was supposed to be a major upgrade to Siri, but it failed to take off as promised. [7:15] They made an initial push back in June of 2024 to do this with OpenAI and their GPT model. [7:24] They made an initial push back in June of 2024 to do this with OpenAI and their GPT model. [7:26] They made an initial push back in June of 2024 to do this with OpenAI and their GPT model. [7:31] Look at that one د comenz whipping out social media Phi and bring Apple across the water, [7:36] and the 360 ThreadNY女 tale spread. [7:37] and the 360 ThreadNY妖єe display, site keyword Dig가� promo. [7:43] And this is Apple. [7:45] Look at that one click of reverse, and they're everywhere. [7:47] It's just mad, massively fast. [7:50] It became a recurring trend as well, people have been going for it and watching turnover. [7:54] And so this is part of the evolution of how fast things are moving. [7:56] And so this is part of the evolution of how fast things are moving. [7:57] for Google's AI. Do you think that Apple has made the right choice in partnering with Gemini for [8:04] this rebooted Siri? Absolutely. We all know that Apple tends to want to have the most important [8:10] tech stacks internal. But until that day comes, I think this is the best possible partnership. [8:16] What they're getting in Gemini looks to be the best one at the moment out there. And it wouldn't [8:23] surprise me if the license was very specific about Apple having control over the parts they [8:30] licensed on their devices. The Apple alphabet relationship is complicated. Apple's worked with [8:35] Google for years. Google pays Apple more than $20 billion annually already to be the default search [8:42] on iPhone. They used to be adversaries to the point where they sued each other. But now like [8:47] billions of dollars are being shared. There's a much more of a collaboration going on. And if [8:53] anything, [8:53] it kind of demonstrates the flexibility of Apple over the years. In the AI era, it's much more about [8:59] coopetition, you know, competing and cooperating sometimes with the same parties. Sure, you have a [9:06] frenemy relationship, but I think the world has understood what Apple's really good at and what [9:11] Google's really good at. The other standing question is whether being late and partnering [9:15] actually works to Apple's advantage versus just developing the tech on its own. I like Apple's [9:21] position as a late mover. Apple has [9:23] got to sit back and watch and go, Okay, is this is a company like open air going to turn into a [9:28] Netscape from like the internet days, we weren't the first with the iPod, you know, with an mp3 [9:34] player, they are going to be a late adopter of certain AI technologies. And they're going to be [9:40] able to do it in a much different way where it doesn't require all of the infrastructure in the [9:45] cloud. There's no big downside to watching everybody else spend $100 billion in learning. And so they have three years of high [9:49] There's no big downside to watching everybody else spend $100 billion in learning. And so they have three years of high [9:49] There's no big downside to watching everybody else spend $100 billion in learning. And so they have three years of high [9:53] insight here to look at, and to decide, you know, what angle they're going to take. [9:58] But there is a case to be made that it puts Apple at a real disadvantage. [10:02] When you entrust Google to run such an important core part of your value proposition, let's say that they're the engine [10:09] behind Siri, and Siri is going to be used a lot by by people in theory, then it's a very dangerous dependency that Apple's [10:17] creating. So Apple might be at the mercy of Google. [10:20] This is where strategy and [10:23] engineering come together. There has to be a plan at Apple that they have a way out of that dependency. [10:31] Apple's scale gives it a tremendous edge. It already has widespread reach with its devices. [10:36] ChatGPT has 800 million users, but Siri has a billion plus even today. So the users are already there. [10:43] For more than a decade, Apple has made privacy a core brand promise. And now that decision is the single biggest structural [10:51] obstacle to competing in AI. [10:53] But there is an argument that privacy could actually become Apple's AI advantage, along with its product ecosystem, enabling [11:00] a more customized, trusted assistant that's unique to you, something that its rivals can't offer. [11:05] One of the secrets around their services business has been around a walled garden. [11:10] Think this privacy side around a walled garden on AI applications is going to be something that's valuable to consumers. [11:16] Their bigger vision is every app, every function on your phone, your Mac, on your phone, on your computer that's going to be [11:22] handled by you. [11:23] It's going to be running. [11:23] Mac, everything will be AI-powered, [11:27] and they make their own silicon. [11:29] Services have become one of the most profitable parts [11:32] of Apple's business under Tim Cook. [11:34] 2025 marked a record year, [11:36] reaching over $109 billion in revenue, [11:39] up 14% from 2024. [11:42] The services part is about 26% now the business. [11:46] By itself, it's a Fortune 30 company [11:49] if it were priced individually. [11:50] And Apple's strategy seems to be geared [11:52] toward leveraging that. [11:54] It recently released the MacBook Neo, [11:56] bringing more people into the Apple ecosystem [11:59] at a lower price point. [12:00] They're trying to reach down [12:02] to lower and lower price points [12:03] so that the services business, [12:05] so you can get more users to use more services. [12:13] So what does an AI-first Apple even look like? [12:15] Does it exist? [12:16] And does Apple's answer involve opening up the platform, [12:19] relaxing control, courting developers back, [12:22] because that would represent [12:24] a more fundamental cultural shift [12:26] than anything. [12:27] And if that's the case, [12:28] then it's not just a matter of whether or not [12:29] Apple's going to be able to do that. [12:31] It's going to be a matter of whether or not [12:32] Apple's going to be able to do that. [12:34] And if they do, [12:34] that tells you something, too. [12:36] In the AI era, there's intense speculation [12:38] about what the next breakthrough device will look like. [12:41] Meta and Google are working on smart glasses. [12:43] OpenAI is working with Johnny Ive [12:45] on a screenless AI-native device. [12:48] When you look at what Johnny Ives has been charged with [12:53] by Sam Altman, he's reportedly said, [12:55] I want you to do, for the AI era, something that is as consequential [12:56] for the AI era, something that is as consequential [12:57] as what you did for Apple in the internet era. [13:01] It might be that a kind of a pin-based product [13:05] might be the answer, [13:07] might be a really interesting future direction for products, [13:11] but it just hasn't all come together yet. [13:14] They're famously late to these, [13:16] but ultimately wanting to be more comprehensive [13:19] and really leverage these devices kind of fitting together. [13:23] But for now, the phone isn't going anywhere. [13:25] Apple's been rumored to be working on a foldable phone [13:27] for years now with a possible release later this year. [13:30] We're going to have displays. [13:31] I think any of these pins, pens, all these pendants, [13:35] all these things, I think they're all accessories [13:37] to the phone because you do need [13:39] that visual information to be shown visually. [13:41] I think that the device of the future [13:43] is still going to be pretty much the handheld [13:45] touchscreen device. [13:46] The idea of having a trusted digital assistant [13:50] that can look over multiple apps, that can power apps, [13:53] that can basically take away consumers [13:55] some of their mundane tasks, [13:57] and automate them, I think is really powerful. [14:00] And I think Apple and Google are probably the two companies [14:03] that have the biggest opportunity there. [14:05] And Apple's play is around the safety and the security side, [14:10] which is unique relative to Google. [14:14] So what if Apple fails? [14:16] Let's say Apple doesn't figure AI out. [14:19] In that case, I think you basically have a company [14:21] that becomes like Yahoo. [14:23] They were early in search, [14:25] but they really weren't successful at evolving [14:29] at the pace and search. [14:30] They were looking for the right approach [14:32] that they needed to kind of win that key market share [14:34] and distribution. [14:35] It's very rare that a company can kind of regain [14:37] their momentum once they have lost that. [14:40] But if there is one thing that Apple's 50-year history [14:43] shows us, it's that the company has a way [14:45] of finding its moment. [14:46] The greatest successes came when they really aimed [14:49] for very big breakthroughs. [14:52] And that the small stuff tended to be failures. [14:55] The big stuff, they get right. [14:56] And they're careful about choosing what big stuff to chase. [15:00] The first company that can bring together [15:03] the right experience, the right AI platform [15:06] for knowing and doing, and the right business model [15:09] for both users and partners, they will actually [15:12] be the dominant technology company for this next AI age. [15:17] They've never been first at this stuff. [15:20] They've always just made it better and perfected it. [15:24] Time will tell. [15:25] And I think the next two years are going to be [15:27] probably the most exciting couple of years in Apple. [15:30] It's going to be more successful than we've [15:31] seen over the last 20 years.