In the keynote presentation for WWDC 2024, Apple (AAPL) finally unveiled its highly-anticipated and long-overdue blueprint for the AI Race with its new Apple Intelligence system.
Initially, the launch seemed to lack the fireworks that investors were expecting. AAPL opened the day at $196.90 and closed it at $193.12. Not exactly the stock boost Tim Cook wanted.
While the Apple Intelligence system did include some cool features like a big upgrade to Siri, AI-powered content generation, and integration with ChatGPT, the debut lacked the sort of “revolutionary” product launch that investors have come to expect out of Apple announcements through the decades.
But after a slew of analyst upgrades this morning, investors have changed their tune.
AAPL stock is now up 6.5% at the time of this writing!
But before this turnaround, we already saw the potential Apple Intelligence has to be best AI in the world.
Narrow AI systems like ChatGPT are the most popular AI tools in the market. And consumers want these narrow AI systems in their pocket, tailored to them. We think that Apple has put forth the most useful consumer application of AI yet.
Humane tried it with its Humane AI Pin.
Rabbit tried it with the Rabbit R1.
Apple’s former design chief Jony Ive is trying it with OpenAI, reportedly fundraising for an “iPhone of artificial intelligence.”
Now Apple, a company that is uniquely positioned to create a hyper-personalized AI assistant in your pocket, is debuting its AI, er, Apple Intelligence.
Will it usher in a new era of personal AI?
AI = Apple Intelligence
We came out of Apple’s keynote knowing exactly what it is not going to do.
Apple is not creating AI to help companies make better products or market them more efficiently.
Apple is not creating AI to help investment managers manage risk in their portfolios.
Apple is not creating AI to automate business tasks like organizational work.
These are valuable applications of AI, but Apple is not building those.
Apple Intelligence aims to build AI that helps billions of people do everyday tasks more easily. This approach is potentially more valuable than any other AI application. Specifically, Apple is turning the iPhone into a hyper-personalized AI assistant. Remember Jarvis from “Iron Man”? Apple wants everyone to have a Jarvis in their iPhone. That is what Apple Intelligence is all about.
Imagine your iPhone equipped with a custom AI model tailored to your needs, wants, traits, schedule, etc. This AI knows your favorite restaurants, the sports you follow, the news feeds you read, how you craft emails and texts, the music you listen to, the shows you watch, and more. It knows everything about you.
And it would be able to help you do everything.
Having trouble picking a restaurant for Friday date night? Let your Apple Intelligence AI help you.
Not sure what movie you want to watch tonight? Let your Apple Intelligence AI help you.
Struggling to find new music you like? Let your Apple Intelligence AI help you.
That is the future of Apple Intelligence – a future wherein AI helps you do everything on your phone just a little more easily.
Apple & OpenAI: Small Steps Today, Giant Leaps Tomorrow
Apple’s first steps into this foray are small.
There were no announcements yesterday about Apple Intelligence that dropped jaws and made everyone go, “Wow!”
The announcements were cool.
Siri is getting a major upgrade. It will pull data across multiple apps to perform cross-app actions, like taking a dinner reservation from an iMessage conversation with your mom and adding it to your calendar. Apple also announced AI-powered tools like Genmoji, where you can use AI to create your own emojis. The company also announced a coming integration with ChatGPT on all iPhones.
All of those are cool announcements. None of them were landmark announcements.
But do not interpret the lack of landmark announcements yesterday as Apple being unable to compete in the AI race.
For starters, Apple Intelligence requires at least an iPhone 15 Pro or Pro Max, and only 10% of Apple’s installed base has these models. Therefore, it’s likely that Apple Intelligence and the convenience it brings may encourage an upgrade “supercycle,” as consumers rush to buy the latest iPhones capable of running Apple Intelligence. It’s no different than the upgrade supercycle Apple saw when it released iPhone 12 with 5G connectivity.
The Final Word
Apple has embarked on a journey of a thousand miles with Apple Intelligence. Yesterday, it took the first step on that journey. The company will take many more steps in the coming months. When the journey is complete, we think Apple Intelligence will become the most transformative AI on the planet.
Consider all the data your iPhone collects daily: your Spotify or Apple Music streams, YouTube shows, news feeds, and messages. Apple has all the personal data needed to create hyper-personalized AI. But data is only half of creating great AI.
Great AI is like a great car – it needs a great engine and a lot of fuel. Apple has the fuel because they have the data. But it does not have a great engine. That is where OpenAI comes into play. The company behind ChatGPT has the greatest AI models in the world. It has the best engine in the AI race.
Apple confirmed yesterday that it is working with OpenAI to natively integrate ChatGPT into the iPhone through Siri. This collaboration is significant. Considering Apple’s other announcements about Apple Intelligence, such as AI-powered content generation, it seems likely that Apple is using OpenAI’s models across its entire system. ChatGPT excels at content generation, after all.
With Apple’s data and OpenAI’s AI models, Apple Intelligence is equipped with the most fuel and best engine in the AI Race. That’s why I think Apple could actually end up winning this race. I think Apple Intelligence could, in time, become the world’s best AI.
Apple’s entry into the AI race, whether it wins or not, is a significant moment for the industry. Everyone is now involved. Apple was the last “holdout” from Big Tech. Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA), Alphabet (GOOGL), and Meta (META) have been fully committed to AI for several months. Now, Apple is joining them. All of the world’s most important tech companies are fully invested in AI.
Which means you should probably be all-in with AI, too.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
P.S. You can stay up to speed with Luke’s latest market analysis by reading our Daily Notes! Check out the latest issue on your Innovation Investor or Early Stage Investor subscriber site.
