Apple, the once undisputed tech darling, finds itself facing mounting pressure from investors regarding its perceived sluggishness in the burgeoning field of artificial intelligence (AI). This comes as competitors like Microsoft and Samsung aggressively embrace AI innovation, leaving Apple scrambling to catch up.
For over a year, investors have consistently bombarded Apple CEO Tim Cook with the same question: what's the plan for generative AI? Cook's response? "Stay tuned." This lack of clarity and tangible progress has led to growing investor impatience.
In a move indicative of Apple's strategic shift, the company recently decided to reallocate resources from its abandoned electric car project to AI. While this decision received positive feedback from investors, a mere 1% increase in share price suggests a cautious optimism. Doubts still linger as Apple faces the challenge of living up to the high expectations set by its ambitious rivals.
Ever since the investor concerns first surfaced, Cook has consistently attempted to address them during quarterly earnings calls. In the recent annual shareholder meeting, he reiterated Apple's long-standing commitment to AI, highlighting existing applications of the technology within Apple products. He further emphasized the company's significant investments in generative AI, with potential features expected to be unveiled at the upcoming developer conference.
Despite being a long-time favorite of legendary investors like Warren Buffett, Apple has experienced the weakest stock performance among its tech peers in the past year. While a sluggish iPhone business plays a role, the lack of groundbreaking AI advancements is also a contributing factor.
In today's market, David Wagner, portfolio manager at Apple shareholder Aptus Capital Advisors, notes that "AI is the topic du jour," driving investor sentiment more than ever. Investors are clamoring for Apple to deliver a compelling narrative around AI, a space currently dominated by Microsoft through its investment in OpenAI, the creators of the popular ChatGPT program.
Apple's stock growth of over 20% in the past year pales in comparison to Microsoft's impressive 60% surge and Nvidia's astronomical triple-digit gains. These contrasting figures highlight the competitive landscape, where companies like Microsoft and Nvidia have successfully leveraged AI to fuel their growth.
Apple's early foray into consumer AI with Siri in 2011 placed them initially at the forefront. However, the technology stagnated in recent years, struggling to keep pace with the accuracy and functionality advancements achieved by Amazon's Alexa and Google Assistant. Additionally, Apple's stringent data privacy practices have been cited as an impediment to developing more advanced AI models.
In 2018, Apple sought to bolster its AI efforts by hiring John Giannandrea from Google. While his appointment as senior vice president directly reporting to Cook signifies the increased importance of AI within Apple, the company has yet to deliver the kind of groundbreaking announcements seen from its competitors.
Android phone manufacturers have aggressively integrated new AI features into their devices. Samsung, a leading competitor, has recently launched high-end Galaxy phones showcasing advancements in AI, with features like real-time language translation during phone calls and photo editing capabilities.
Analysts and investors remain uncertain whether even successful integration of new AI features by Apple will translate to significant sales growth. While essential to remain competitive with Android rivals, such features may not be sufficient to trigger a substantial surge in device sales.
Ben Bajarin, a principal analyst at Creative Strategies, cautions against overhyping the current state of AI, stating, "I still struggle with how early we are in AI... none of this feels revolutionary yet." While Apple's Vision Pro headset exemplifies the company's exploration of AI, its commercial viability remains years away.
