This article first appeared on GuruFocus.
Apple (NASDAQ:AAPL) may be entering a more complicated phase of its AI comeback, as Tim Cook’s last annual software showcase as chief executive also pointed to a deeper relationship with Alphabet (NASDAQ:GOOGL), one of Apple’s largest competitors. The World Wide Developers Conference was expected to highlight a stronger Siri, after Apple previously said the assistant would be able to read content on an iPhone screen and complete multi-step tasks. Those features were later delayed, forcing Apple to acknowledge that it had overpromised and underscoring how far the company had fallen behind in generative AI.
Apple’s response now appears to involve more help from Google. The upgraded Siri and several AI-enhanced apps are expected to roll out later this year, while initially skipping the European Union and China for regulatory reasons. Apple says its AI models were developed in collaboration with Google, distilled from Gemini and partly trained on Google’s TPUs. Its higher-end AFM Cloud Pro model runs in Google’s cloud and uses Nvidia (NASDAQ:NVDA) chips, meaning simple AI tasks could stay on the iPhone, while more demanding requests may be processed inside Google data centers. Apple has said no data is stored on Google’s servers and that Google cannot train its AI using that information.
For investors, the bigger question is whether Apple’s AI push could give Alphabet more leverage over time. Google already pays billions of dollars each year to remain the default search engine on iPhones, including $20 billion in 2022 under a search agreement disclosed through US antitrust court documents. Now, with Google’s cloud and AI infrastructure becoming important to Apple Intelligence, Alphabet could possibly gain more negotiating power in the relationship. Apple may still catch up in AI, but this partnership could raise fresh questions around privacy, regulatory scrutiny and strategic dependency, especially if switching away from Google’s technology becomes costly or disruptive.
