The need to increase investments in the development of artificial intelligence forced Apple’s management to admit at the quarterly reporting conference that expenses in this area had already begun to grow in the past quarter. However, the financial indicators available to the public allow us to talk about Apple’s relatively modest expenses in this area against the background of most competitors.
According to CNBC, last quarter Apple announced an increase in expenses for the acquisition of real estate and equipment by 3% year-on-year to $2.15 billion, as well as a consistent increase in these expenses by 8% compared to the previous quarter. Some of these investments, presumably, had nothing to do with artificial intelligence, but even this absolute amount is enough to claim that Apple’s expenses on creating infrastructure for AI are quite modest. The company’s management explained that it prefers to adhere to a hybrid approach to the construction of data centers, relying on the rental of ready-made capacities from third-party providers.
Competitors’ Aggressive Spending and Market Positioning
In comparison, Microsoft incurred $13.87 billion in capital expenditures last quarter, they increased by 55% year-on-year. Alphabet’s core expenses grew by 91% to $13.19 billion, while Meta Platforms saw its capital expenditures grow by 31% year-on-year to $8.3 billion. The latter’s founder, Mark Zuckerberg, recently justified the growth of core expenses during his speech by the higher risk of losing the company’s position in the AI segment compared to possible financial losses from wasted investments. He sees Apple as a strong competitor, and this time he would not like to allow it to control the bulk of the market during this important technological transition. If you do not invest seriously now, as Zuckerberg explained, you can lag behind other market participants for at least 10 or 15 years.
Apple’s Hybrid Approach and Future Prospects
Apple’s desire to avoid buying and renting expensive Nvidia accelerators also contributes to the reduction of its costs for the development of AI systems. It has recently become more comfortable relying on Google processors. CEO Tim Cook explained at Apple’s quarterly conference that a hybrid approach to developing AI infrastructure allows the company to attribute capital expenditures to the budget of cloud service providers. Apple’s partners include Amazon, Google, and Microsoft. The latter funds the development of OpenAI, with which Apple itself cooperates in the field of integrating the ChatGPT chatbot and the Siri voice assistant.
Apple representatives declined to discuss the details of the agreement with OpenAI this week, citing its confidentiality, notes NIXSolutions. Tim Cook does not rule out that some opportunities for monetization will appear in this area. We’ll keep you updated on any developments in Apple’s AI investment strategy and its impact on the company’s market position.