Apple’s generative AI plans are suddenly a lot more important to its future

The Apple (AAPL) car is dead. And with no big, splashy products to look forward to, Wall Street is pinning its hopes for the tech giant’s immediate future on, what else, generative AI.

In his initial report on Apple’s decision to shutter its automotive efforts, Bloomberg’s Mark Gurman said a number of the 2,000 employees previously assigned to the project will move over to the company’s artificial intelligence division where they’ll work on getting Apple’s generative AI chops up to snuff.

The news helped briefly buoy shares of Apple Tuesday, sending them to an intraday high of $183.92 before closing out the day at $182.63. Shares of Apple were trading at $180.33 midday Thursday.

Apple is the second-wealthiest company in the world by market valuation, behind only Microsoft (MSFT), with a market cap of $2.77 trillion. But the iPhone maker is also contending with a choppy smartphone market that has investors wondering where the company’s next leg of growth will come from.

And, short of a fully redesigned iPhone, it looks like generative AI is the only new product that could help goose device and services sales.

Apple CEO Tim Cook gestures at Apple's annual Worldwide Developers Conference at the company's headquarters in Cupertino, California, U.S. June 5, 2023. REUTERS/Loren Elliott

Apple CEO Tim Cook gestures at Apple’s annual Worldwide Developers Conference at the company’s headquarters in Cupertino, Calif., June 5, 2023. (Loren Elliott/REUTERS) (REUTERS / Reuters)

But Apple, as is its M.O., has been tight-lipped about its generative AI efforts. CEO Tim Cook hasn’t offered any insights into the kind of capabilities the company is exploring via the technology or if they’ll come to market this year.

During Apple’s latest earnings call, Cook said he is excited to show off what the company has been working on and that it will debut its efforts this year. He later said generative AI is a huge opportunity for Apple. During the company’s annual shareholder meeting on Wednesday, the CEO said Apple is investing significantly in AI and will break new ground in generative AI later this year.

That means we’ll likely learn more about Apple’s generative AI plans during its upcoming WWDC conference, which typically takes place in June. And the pressure is on for those announcements to be more than a few new photo editing tools or kitschy features that let you change the tone of your text messages to sound like Shakespeare.

“We believe Apple is set to launch a host of new Gen AI software features at WWDC in early June, which we see as a key event helping to catalyze an iPhone upgrade cycle,” Morgan Stanley analyst Erik Woodring wrote in a note following the Bloomberg report.

In his own note, Wedbush’s Dan Ives said he believes “Apple will incorporate generative AI into iPhone 16 and this will mark the start of a new frontier of growth for the golden installed base of Cupertino.” What’s more, he said the addition of the former vehicle engineers and developers could accelerate Apple’s AI initiatives over the next 12 to 18 months.

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The generative AI craze has driven shares of Apple’s rivals ever higher, including Microsoft, which eclipsed Apple as the most valuable publicly traded company thanks to its investments in ChatGPT developer OpenAI. Meta (META), Amazon (AMZN), Google (GOOG, GOOGL), and others have similarly jumped on the generative AI bandwagon with their own announcements and product launches.

But diving into the deep end of generative AI is a double-edged sword. Sure, those companies get the fanfare and excitement that comes along with a new generative AI-powered service, but when those services falter, tech firms are left holding the bag. Just look at Google, which pulled its Gemini AI image generator after the software produced images of ethnically diverse Nazis.

That adds additional pressure to Apple to not only hit the market with a bang but also ensure what it rolls out is as bulletproof as possible. We’ll find out if the company has the goods when WWDC kicks off in June.

Daniel Howley is the tech editor at Yahoo Finance. He’s been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.

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