While developing a range of AI tools, Apple still takes a different stance in this area than its competitor Apple

Nearly a year and a half ago, Wall Street analysts asked Apple CEO Tim Cook to outline the company’s plans for artificial intelligence, amid grumblings that in this area, the iPhone maker had nothing specific to offer.

“We still feel very confident about our prospects in creative AI, and we are making significant investments,” Cook said in an interview with Reuters, noting that the company he leads has pledged more than $100 billion in research and development in the last five years.

Apple’s biggest competitors allocated similar or even larger amounts to R&D during the same period, but at the same time they also invested heavily in setting up data centers in order to host a range of artificial intelligence services there.

Microsoft spent $14 billion in capital spending last quarter, and Google wasn’t far behind, at $12 billion during the same period. Meanwhile, Meta told investors last week that it expects capital spending of up to $40 billion this year.

Apple thinks differently. Its capital spending for all of 2023 was just over $10 billion.

The company, which generates the majority of its revenue through the sale of consumer devices, has paid a heavy price for this stance in 2024, with its shares falling 10% as investors worry that Apple is starting to fall behind in the AI ​​race. But on Friday, Apple stock rose 6.4%, reversing some of its recent losses.

Shares of Meta, Google and Microsoft — companies that make their profits from selling software and providing advertising services — have risen to record highs as the three companies vie for dominance in the emerging artificial intelligence scene, although investors, in their own case, are also alarmed by the high cost of building centers. The specialized data and processing needed to train artificial intelligence models.

Apple hinted on Thursday that it would not follow the same tactic. While the company is expected to unveil new artificial intelligence features at its annual conference next month, in addition to bolstering its production lines with AI-capable processors, Luca Maestri, Apple’s chief financial officer, advised investors not to expect massive changes on the way. The tech giant is getting a handle on its capital spending.

In response to an analyst’s question, Maestri pointed to the company’s long-standing practice of sharing the cost of manufacturing tools with its suppliers, an approach that has allowed Apple to cut costs and increase profits for more than a decade.

“We are doing something similar with data centers,” Maestri commented. “We have our own capabilities and also benefit from the capabilities of third parties. It is a model that has historically achieved good results and we plan to continue moving in the future in the same direction.

This approach could ultimately work to Apple’s advantage, as it is still unclear whether AI features such as chatbots capable of operating directly from the device will prompt users to purchase new phones, tablets or laptops, product categories that It remains the company’s largest source of revenue and profit.

Ben Baharin of Creative Strategies commented that while improved processors could be an important factor for some users who need AI tools for professional use, it is not certain that these capabilities will lead to a significant increase in sales.

“It will be something that will help boost sales, but I don’t think it will be the start of an explosive cycle,” Baharin said. “It would be wise not to create excessive expectations.”