Apple, Inc. AAPL is contending with one of the biggest challenges during CEO Tim Cook‘s tenure, said Bloomberg’s Mark Gurman on Sunday.
Biggest Test: “The dawn of AI is his [Cook’s] biggest test to date,” said Gurman in the latest installment of his weekly “Power On” newsletter. Apple entered the AI game back in 2011 with the launch of Siri, its digital assistant, years ahead of others in the AI space. However, it has since trailed behind its competitors, he said.
Apple’s competition, including OpenAI and Alphabet, Inc.’s GOOGL GOOG, have become “AI superstars” and are going from strength to strength, he noted.
“Apple’s priority now is not getting smoked on its home floor,” he said.
That said, Apple has some advantages of its own, such as “money, talent and a powerful platform,” he said. It will require a meaningful change to its strategy as well as some help from its AI competitors, he added.
Gurman, however, flagged one pushback for Apple. The company’s AI-related features like Siri rely mostly on processing information on the iPhone itself and lacks data collection, he said.
“Apple does both these things deliberately, part of its efforts to protect privacy and security. But they don’t always make for the best experience,” he added.
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Fresh Start: Apple now has the opportunity to start fresh, said Gurman. The company is all set to unveil new generative AI features at the annual Worldwide Developers Conference on June 10 and is expected to make some bold changes, he said.
Cupertino will still stick to its “on-device” approach, with its own large-language models powering AI features on phones and computers, the Apple specialist said. The company is also planning to deliver services via the cloud, putting its high-end Mac chips into data centers to handle these online features, he said.
Changes To Siri: Gurman expects the company to improve Siri’s voice capabilities, giving it a more conversational feel, and add features. Calling the approach “proactive intelligence,” the Apple leaker said the improvements will likely include services like “auto-summarizing notifications from your iPhone, giving a quick synopsis of news articles and transcribing voice memos, as well as improving existing features that auto-populate your calendar and suggest apps.”
“There will also be some enhancements to photos in the form of AI-based editing, but none of those features will impress people who have used AI in Adobe Inc.’s apps for the last several months,” he said.
Missing Item: Apple’s generative AI technology wasn’t advanced enough for the company to release its own chatbot like ChatGPT or Gemini, Gurman said. Some company insiders are averse to the idea, fearing it could damage Apple’s reputation. Chatbot mishaps have brought controversy to companies like Google, and they worry similar incidents could tarnish Apple’s image, he said.
But sensing there is demand for such a feature, Apple is teaming up with OpenAI to add the latter’s tech to iOS18, the next version of iPhone software, Gurman said. The two companies are prepping to a make a major announcement of this partnership at the WWDC, he said.
Gurman, however, said, to be successful, Apple is going to have to eventually move away from a partnership approach, build a chatbot of its own and integrate it deeply into the company’s products.
Search Feature: Gurman said to handle online searches, Apple should have its own AI-based search engine.
Matching Competition: Apple’s in-house AI announcements may not be nearly as impressive as what OpenAI and Google have already announced, Gurman said. Last week’s announcements from OpenAI and Google regarding their next phase of AI efforts have pushed Apple further behind, he said.
Gurman also flagged concerns in Apple’s rank that users will shrug at the new Apple features and not even bother using them. The tech specialist believes speed sets OpenAI and Google apart from Apple.
“They can improve their AI technology quickly and keep wowing users. Improvements to Siri and other Apple features, meanwhile, have come at a snail’s pace,” he said.
“To keep up with the AI frenzy, Apple will need to add major new features at a far quicker rate. The OpenAI deal and cloud-based AI services will help — but there’s no plan in place for Apple to accelerate its iOS release cycle, at least in the next year.”
Apple ended Friday’s session down 0.02% at $189.87, according to Benzinga Pro data.
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