Apple’s AI Moment Is Coming. It May Not Be Smooth.

Cultural, product barriers stand in the way of Apple capitalizing on AI. Will it be more like NVIDIA, or Google?

Last week, Tim Cook indicated Apple would introduce an AI product “later this year,” and analysts celebrated. Deepwater Asset Management’s Gene Munster said Cook uttered “the magic letters for the first time,” adding “I’d officially welcome Apple to the generative AI freight train.” Even after mixed earnings and light guidance, Apple’s stock price has jumped 5% since.

But Apple’s generative AI rollout may be more complicated than flipping a switch and enjoying NVIDIA-like prosperity. The company will have incumbency tradeoffs to consider, including how much to change iOS to make room for AI. And its culture isn’t built to develop sweeping AI products, as evidenced by its failures with the Homepod. Whatever the route, it won’t be simple.

That Apple missed the generative AI boom is not entirely surprising — and it definitely missed. “I can tell you in no uncertain terms that Apple executives were caught off guard by the industry’s sudden AI fever and have been scrambling since late last year to make up for lost time,” Mark Gurman wrote recently in Bloomberg. The company had been shipping iPhones and Macs at a record pace through the pandemic. And with business booming, its modus operandi was to refine its products, not reimagine them with radical innovation, so large language models didn’t merit much attention.

But as the “generative AI freight train” picked up steam, it became evident Apple would need to get involved. An AI device called the Rabbit R-1 became the hit of CES — and sold out immediately — after a demo of its conversational layer on top of standard apps wowed observers. Ex-Apple employees at Humane also released an AI pin with similar functionality. OpenAI, meanwhile, began working to enable AI agents. None of these products are an immediate threat to the iPhone and iOS, but all could eventually displace some operating system functionality. It would be foolish for Apple to ignore them. And it isn’t.

The right way to add generative AI to the iPhone isn’t entirely straightforward though. Apple can’t make the iPhone into the Rabbit R-1. It would simply be too big of a change. So, its options for a big product overhaul may be mostly limited to the chronically disappointing Siri. And indeed, a better Siri may roll out later this year, according to Gurman, along with incremental improvements like AI-assisted writing in Pages and AI playlists in Apple Music. Similar to Google, Apple may be reticent to risk its core product to introduce AI functionality, and hence realize limited benefits from it.

Even if Apple were to figure out the perfect AI product solution, its culture is not set up to build it. When reporting my book, Always Day One, I came across frustrated ex-Apple employees who said the company’s silos held them back meaningfully. Machine learning engineers working on FaceID, for instance, couldn’t speak with counterparts solving similar computer vision problems in its self-driving car division. As a result, everything moved slower.

Apple does, at times, concentrate resources toward critical initiatives when the situation calls for it, and that may happen for AI as well. “When those projects get the attention at the highest levels of the company, then they can draw from the whole company,” legendary Apple watcher John Gruber told me on Big Technology Podcast this week. Apple, for instance, might bring its best camera engineers to a product like the Vision Pro when it’s a high enough priority. The HomePod might not have merited that push, but with hundreds of billions of dollars in market cap now at stake, Apple could develop a super team to move faster.

There are already signs that Apple is willing to step outside its comfort zone to build AI products. The notoriously secretive company open-sourced an image editing AI model this week, signaling it’s willing to part with some of its longstanding norms to recruit AI talent and push the cutting edge forward. It’ll take more moves like this — and perhaps some more radical — for Apple to capitalize on the moment.

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What Else I’m Reading, Etc.

Medium’s CEO on AI, blogging, and the value of writing [Semafor]

Sam Altman wants to raise trillions (trillions!) to build new AI chips [WSJ]

Sundar Pichai on how Google’s new AI model Gemini fits in the mix [Wired]

The U.S. says take off the Vision Pro while driving [New York Times]

Disney is investing $1.5 billion in Epic Games [CNBC]

Snap stock dropped 30% after missed earnings expectations [CNBC]

Chris Dixon’s book on Web3 is unserious; should’ve been a blog [Citation Needed]

Dixon’s book made the NYT bestseller list via bulk purchases [Vice]

Quote Of The Week

For the first time since ChatGPT’s release, there is another company with an LLM that can compete with Open AI’s most advanced model.

Penn professor Ethan Mollick with an assessment that OpenAI’s leading model has been equaled by Google.

Number of the Week

48%

ARM share price increase on Thursday after the chip designer beat earnings expectations, a $38 billion move.

This week on Big Technology Podcast: Apple Mega-Episode W/ Daring Fireball's John Gruber: AI, Vision Pro, China, App Store & More

John Gruber is the author of Daring Fireball. He joins Big Technology Podcast for a mega episode on the state of Apple. We cover: 1) The company's vibe amid revenue declines 2) The impact of its services business 3) Its position in China 4) How AI might change the user interface of computing 5) Can Apple keep up with the changes if we move beyond the screen 6) Gruber's reaction to the Vision Pro 7) The stakes of Apple's Vision Pro bet 8) Apple conflict with Meta and who is getting the best of it 9) Is Apple too attached to its App Store fees 10) Who might succeed Tim Cook?

You can listen on Apple, Spotify, or wherever you get your podcasts.

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