Tim Cook Calls Apple's AI Strategy a 'Competitive Weapon'

Apple shares fell Thursday as CEO Tim Cook addressed supply concerns on what will be his last earnings call in the top job. The real news was how Cook framed Apple's artificial intelligence strategy as a competitive edge against hyperscaler peers.

Apple's hybrid approach, running some AI workloads on iPhones and Macs rather than relying entirely on cloud data centers, is an advantage, Cook said. That signal to Wall Street comes as Apple gears up for the launch of an updated Siri this fall.

"The ability to run some percentage of requests on device is also very strategic and sort of a competitive weapon," Cook told analysts.

Apple has spent far less on capital expenditures than its big tech peers as it works to establish itself in AI. Alphabet, Amazon, Meta and Microsoft have each committed to well over $100 billion in capex this year. Apple's June-quarter capex came in at $2.46 billion, below a StreetAccount estimate of $3.44 billion. Cook said operating expenses are rising.

"We have been growing our opex and spending more in AI in general," Cook said.

Instead of pouring money into data centers, Apple emphasizes that much of its Apple Intelligence suite runs on the device itself, using the company's chips without phoning home to the cloud. The approach can save businesses money, Cook said, pointing to Disney as an example. Disney's creative teams are increasingly using Macs for on-device AI workflows to cut cloud token costs and keep intellectual property secure, he said.

Apple's hybrid strategy faces its first real test when Siri AI is released to the public. The assistant will rely on the iPhone's processor to decide which on-device model to summon for each query. For more complex tasks that exceed local models, Apple will use Google Cloud, with servers powered by Nvidia's GPUs. Apple disclosed the move in June when it revealed the software.

At the same time, Apple signaled it would cap users on its cloud models and that those limits could be raised through iCloud, creating a potential new revenue stream from AI. Cook said Thursday that no complete plan for charging users exists, but he sees AI as a selling point for subscriptions.

"We do believe there will be people that want to use it a lot, and so we will have some kind of upgrade possibilities on iCloud+," Cook said.

Apple shares fell 2.5% in the session. The Apple (AAPL) profile page has the stock's full price history and earnings data, while the NVIDIA profile tracks the chipmaker whose GPUs underpin much of the cloud AI infrastructure Apple has chosen.