Apple Inc.’s AAPL generative AI ambitions might face challenges as it aims to catch up with industry competitors like Meta Platforms Inc. META and Microsoft Corporation MSFT, with concerns raised by analyst Ming-Chi Kuo about the required multi-billion-dollar investment.
What Happened: On Monday, Kuo, an analyst at TF International Securities, shared his latest predictions and concerns about Apple’s future generative AI business/services.
According to Kuo’s latest survey, Cupertino plans to procure 2,000 to 3,000 AI servers in 2023 and a more substantial 18,000 to 20,000 units in 2024.
This investment represents only 1.3% of global AI server shipments in 2023 and 5% in 2024 and falls short compared to competitors like Meta, which is poised to purchase about 40,000 AI servers next year.
The Supply Chain Challenge: Kuo said that Apple is buying fewer AI servers this year than in 2024 because there aren’t enough NVIDIA Corporation’s NVDA AI chips available. Moreover, the tech giant ordered them later than some other big customers.
However, the analyst also noted that while the supply chain situation is expected to improve in 2024, Apple would still lag significantly behind its competitors regarding AI server count.
“Assuming that Apple doesn't provide services such as cloud hosting, it's not appropriate to compare Microsoft (with AI server purchases of about 80,000–100,000 units in 2024) with Apple.
What Can Apple Do To Bridge The Gap: As per Kuo, the company’s AI infrastructure computing power may be less than its rivals, but the company can leverage its software expertise to make strides in the generative AI field.
He concluded by saying, “It’s reasonable to estimate that Apple would have to invest at least several billion US dollars annually to have a chance of catching up with its competitors.”
Kuo also raised concerns about the future of Apple’s generative AI business if it chooses to allocate just a fraction of the required amount.
“If Apple really intends to spend only a billion dollars a year on generative AI development, it won’t matter much if my survey is wrong, but I am genuinely concerned about the future of Apple’s generative AI business/service,” he concluded.
Why It’s Important: Previously, it was reported by Bloomberg’s Mark Gurman that Apple plans to spend more than $1 billion each year to develop products and features based on generative AI.
He quoted a person familiar with Apple’s plans who said that the company thinks not offering generative AI products was a “pretty big miss internally.”
Apple had cash and cash equivalents of roughly $29 billion as of its last reported quarter.
It is worth noting that so far, Apple has only introduced one significant AI-related update, an enhanced auto-correct feature in iOS 17.
While there have been rumors about Apple working on its ChatGPT rival “Apple GPT,” the company has yet to release any substantial consumer-facing AI products or services.
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