Here's how Apple's AI story will play out in 2024

CNBC Television
15 Dec 202303:35

TLDRIn the transcript, Gene Munster from Deep Water Asset Management discusses Apple's AI strategy, predicting that while Apple may not initially release a foundation model to compete with ChatGPT or Claude, they are likely to enhance Siri with personalized AI built on open-source models. Munster suggests that Apple's quiet approach indicates a significant opportunity for multiple expansion, and he foresees the company eventually developing its own foundation model in the long term. He also highlights the potential for new subscription services and Apple's ability to leverage generative AI in commerce and product features, positioning Apple investors to anticipate growth in AI.

Takeaways

  • 🚀 Apple is expected to make significant moves in the AI field in 2024, potentially impacting their stock value.
  • 🗣️ Tim Cook's last earnings call indicated that Apple is investing quite a bit in AI, albeit quietly and responsibly.
  • 🤖 Apple is not expected to introduce a foundation model to compete directly with AI models like ChatGPT or Claude from Anthropic.
  • 📈 The current trading price of Apple shares may offer an opportunity for multiple expansion if more AI initiatives are revealed.
  • 🔄 Apple's strategy may involve building upon an open-source AI model to enhance Siri and develop personalized AI services.
  • 🌐 Long-term, Apple may develop their own foundation model, but this is likely several years away and will require substantial time and energy.
  • 💡 Apple's AI advancements could lead to new subscription services or add-ons, increasing revenue potential.
  • 🔧 Developers may be given access to AI tools, with Apple potentially charging them for this access rather than direct consumers.
  • 🛍️ Apple sees an opportunity in integrating generative AI with commerce, which could become a new revenue stream.
  • 💼 The company's financial capacity and computing power are key advantages in developing and implementing AI technologies.

Q & A

  • What did Tim Cook mention about AI on the last earnings call?

    -Tim Cook mentioned that Apple has been quiet on the topic of AI, but assured that there's ongoing work in that area and the company is investing quite a bit in it, doing so responsibly.

  • Why have Apple shares not been going up in anticipation of AI developments?

    -According to Gene Munster, the anticipation of AI developments has not been a driving factor for Apple's stock price increase. He considers the current situation as just a little teaser at best, suggesting that more substantial AI-related announcements from Apple are expected in 2024.

  • What is Gene Munster's prediction regarding Apple's approach to AI and generative models?

    -Gene Munster does not believe that Apple will create a foundational model to compete directly with existing AI like ChatGPT or Claude from Anthropic. He suggests Apple might build upon an open-source model, particularly enhancing Siri and focusing on personalized AI.

  • What potential does Gene Munster see for Apple's stock due to their AI efforts?

    -Gene Munster sees a significant opportunity for Apple's stock to experience multiple expansion if the company starts discussing its AI efforts more openly, citing Apple's current valuation compared to Microsoft and the quietness on their AI developments as factors for this potential growth.

  • How does Gene Munster envision Apple's long-term AI strategy?

    -In the long term, Munster believes that Apple will develop its own foundational model for AI, although he acknowledges that it will take a lot of time and energy. For the next several years, he expects Apple to leverage third-party solutions.

  • What advantages does Apple have in developing AI according to the discussion?

    -Apple's advantages in developing AI include its substantial financial resources, which are crucial for the significant computing power required for AI development. This financial capability positions Apple competitively in the AI space.

  • How might Apple's AI developments impact its business model?

    -Apple's AI developments could positively impact its services growth by allowing developers to access and leverage AI capabilities, potentially leading to new subscription services or add-ons that enhance Apple's existing offerings.

  • What unique opportunity does AI present to Apple in the context of search and commerce?

    -AI presents Apple with an opportunity to redefine its role in search and commerce, leveraging generative AI to potentially integrate commerce into its ecosystem, thereby expanding its market and services.

  • How does Gene Munster view Apple's potential competition with Google in the AI space?

    -While Gene Munster's firm, Deepwater, owns shares of Google and believes in its success in AI, he also sees a unique opportunity for Apple to compete, particularly as AI starts to encompass commerce, highlighting a potential shift in competitive dynamics.

  • What is the underlying strategy behind Apple's focus on AI according to Gene Munster?

    -Apple's strategy focuses on leveraging AI to enhance its services and products, creating a stronger ecosystem and potentially introducing new revenue streams through developer access to AI technologies and integration of AI into its search and commerce capabilities.

Outlines

00:00

🚀 Apple's AI Vision and Stock Performance in 2024

The paragraph discusses the potential of Apple's AI and its impact on the company's stock performance in 2024. It highlights a quote from Tim Cook, emphasizing that while Apple has been quiet about AI, they are investing significantly and responsibly in the technology. The speaker, Gene Munster, predicts that Apple will reveal more about their AI initiatives in 2024, focusing on enhancing Siri and developing personalized AI. He believes that Apple's stock, which has not yet reflected expectations of AI advancements, is poised for multiple expansion. Munster also foresees that Apple will eventually develop their own foundation model in the long term, leveraging third-party resources initially. The discussion touches on the company's capacity to invest in AI due to their financial strength and the potential for new subscription services or add-ons. Lastly, it suggests that Apple's approach to AI will likely involve providing developers with access and charging them for it, rather than a separate subscription model for generative AI.

Mindmap

Keywords

💡AI

Artificial Intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think and learn like humans. In the context of the video, AI is a central theme, with discussions about Apple's investment and development in this area, particularly in relation to their product, Siri, and their potential to create personalized AI experiences.

💡Vision Pro

Vision Pro likely refers to a professional version of a vision or prediction tool, possibly related to AI or analytics. The term suggests a high-level of precision in forecasting or analyzing trends. In the video, it is mentioned in the context of rallying and stock performance in 2024, implying that Vision Pro might be an analytical tool used in financial forecasting.

💡Gene Munster

Gene Munster is a well-known technology analyst and investor. In the context of the video, he is a partner at Deep Water Asset Management and is providing his insights on Apple's AI strategy and its potential impact on the company's stock performance.

💡Deep Water Asset Management

Deep Water Asset Management is likely an investment firm that specializes in technology or asset management. The mention of this firm in the video indicates that the discussion is coming from a financial and investment perspective, focusing on how AI developments at Apple could influence stock prices and market trends.

💡Tim Cook

Tim Cook is the CEO of Apple Inc., a leading technology company. In the video, his statements during an earnings call are referenced to provide insight into Apple's stance and strategy on AI, indicating his leadership and influence on the company's direction in this field.

💡Foundation Model

A foundation model in AI refers to a general-purpose, pre-trained model that can be fine-tuned for various tasks and applications. The concept is significant in the video as it discusses Apple's potential approach to AI, with the suggestion that they may not develop a foundation model from scratch but instead build upon existing open-source models.

💡Open Source

Open source refers to something that can be modified and shared because its design is publicly accessible. In the context of the video, it is suggested that Apple might leverage open-source AI models as a basis for their own AI developments, which would allow them to integrate AI into their products more efficiently and cost-effectively.

💡Siri

Siri is Apple's virtual assistant, an AI-driven personal assistant that is integrated into Apple devices. In the video, Siri is mentioned as a key component of Apple's AI strategy, with the suggestion that the company may enhance and personalize the AI capabilities of Siri in the future.

💡Multiple Expansion

Multiple expansion in a financial context refers to an increase in a company's stock price earnings multiple. In the video, it is suggested that Apple's AI developments could lead to multiple expansion, meaning that the market could value Apple's stock at a higher multiple due to increased expectations of future earnings.

💡Subscription Service

A subscription service is a business model where customers pay a recurring fee to access a product or service. In the context of the video, there is a discussion about the potential for Apple to introduce new subscription services or add-ons that could capitalize on their AI developments, creating additional revenue streams.

💡Computing Power

Computing power refers to the ability of a computer or system to perform operations quickly and efficiently. In the context of AI, it is crucial because AI models, especially deep learning models, require significant computational resources for training and inference. The video implies that Apple has the necessary computing power to invest in and develop AI technologies.

💡Commerce

Commerce refers to the activities related to the exchange of goods and services, typically involving trade, buying, and selling. In the video, the mention of commerce in the context of generative AI suggests that Apple might integrate AI into its e-commerce platforms or services to enhance user experience and drive sales.

💡Flywheel

In a business context, a flywheel is a metaphor for a mechanism that, once set in motion, generates momentum that can drive growth and success. In the video, the term is used to describe Apple's strategy of continuously improving their products and services, which in turn attracts more customers and drives further improvements.

Highlights

RALLY WILL CONTINUE AND AI AND, THE VISION PRO WILL SEND THE, STOCK HIGHER IN 2024.

GENE MUNSTER, PARTNER AT DEEP WATER ASSET, MANAGEMENT shares insights on the AI STORY AT APPLE.

APPLE has been quiet on the topic of AI but is investing quite a bit, responsibly.

Apple's stock has not been going up in anticipation of AI, indicating a potential opportunity for growth.

In 2024, expect to hear more from Apple when it comes to AI.

Apple is unlikely to come out with a foundation model to compete with ChatGPT or Claude from Anthropic.

Apple may build on top of an open source model to enhance Siri and create personalized AI.

Apple shares are trading at 29 times 2025 earnings, below Microsoft at 31.

Apple is a significant opportunity for multiple expansion due to their quietness on AI.

Long term, Apple will likely have their own foundation model, but will leverage third parties for the next several years.

Apple's capacity to invest in AI is bolstered by their financial resources and computing power.

Apple may introduce new subscription services or ad-ons related to generative AI.

Developers will be allowed access to generative AI features, potentially charged for this access.

Apple has an opportunity within the context of generative AI to include commerce.

Apple's time-tested strategy of building better features within products to drive growth is expected to continue.

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