Stephen Nellis
(Reuters) – For much of the past year and a half, Apple (NASDAQ:) CEO Tim Cook has been fielding questions from Wall Street analysts about his artificial intelligence plans amid grumblings that the iPhone maker doesn’t have a history on artificial intelligence.
After the company reported quarterly earnings on Thursday, Cook insisted Apple would provide specific details about its AI plans very soon.
“We continue to be very optimistic about our capabilities in generative artificial intelligence and are making significant investments,” Cook told Reuters in an interview, noting that the company has spent $100 billion on research and development over the past five years.
Apple’s big tech rivals spent comparable or even greater amounts on research and development over the same period, but they also spent heavily on building data centers to house artificial intelligence services.
Microsoft (NASDAQ:) spent $14 billion on capex in the latest quarter, with Alphabet’s Google (NASDAQ:) not far behind at $12 billion. Meta Platforms (NASDAQ:) told investors last week that capital expenditures could reach $40 billion this year.
Apple thinks differently. Capital expenditures for all of 2023 were just over $10 billion.
Apple, which makes most of its money by selling consumer devices, has paid for that position for much of this year, with its shares falling 10% as investors worried the company was falling behind in the AI race. Shares of Meta, Google and Microsoft, which make money by selling software or advertising services, have soared to record highs as the companies try to dominate the emerging world of artificial intelligence, although investors have also reeled from soaring data center prices. and specialized processors needed to train AI models.
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On Thursday, Apple hinted that it would not go down the same path. While Apple is expected to unveil new AI features at its annual software conference next month and refresh its product line with AI-ready chips, CFO Luca Maestri said Apple investors shouldn’t expect huge changes in how how the company handles capital expenditures.
In response to an analyst’s question, Maestri noted the company’s long-standing practice of sharing the cost of manufacturing tools with its suppliers, which has kept Apple’s costs low and increased cash generation for more than a decade.
“We do something similar in data centers,” Maestri said. “We have our own data center capacity and then we use third party capacity. This model has worked well for us historically, and we plan to continue this way going forward.”
That could be good for Apple, too, since it remains unclear whether artificial intelligence features such as on-device chatbots will encourage users to buy new phones, tablets or laptops, which remain Apple’s biggest source of revenue and profit.
Ben Bajarin of Creative Strategies said that while better processors may serve as a “ruler in the sand” for some users who want artificial intelligence tools for professional use, those features may not spark a sales boom.
“It will help boost sales, but I don’t expect it to be a super cycle,” Bajarin said. “You have to be careful to temper expectations.”