Apple chief executive Tim Cook has signaled the iPhone maker is ready to spend more to catch up to rivals in artificial intelligence by building more data centres or buying a larger player in the segment, a departure from a long practice of fiscal frugality.
Apple has struggled to keep pace with rivals such as Microsoft and Alphabet’s Google, both of which have attracted hundreds of millions of users to their AI-powered chatbots and assistants. That growth has come at a steep cost, however, with Google planning to spend US$85 billion (A$131 billion) over the next year and Microsoft on track to spend more than US$100 billion, mostly on data centres.
Apple, in contrast, has leaned on outside data centre providers to handle some of its cloud computing work, and despite a high-profile partnership with ChatGPT creator OpenAI for certain iPhone features, has tried to grow much of its AI technology in-house, including improvements to its Siri virtual assistant. The results have been rocky, with the company delaying its Siri improvements until next year.
During a conference call after Apple’s fiscal third-quarter results, analysts noted that Apple has historically not done large deals and asked whether it might take a different approach to pursue its AI ambitions. Mr Cook responded that the company had already acquired seven smaller companies this year and is open to buying larger ones.
“We’re very open to M&A that accelerates our roadmap. We are not stuck on a certain size company, although the ones that we have acquired thus far this year are small in nature,” Mr Cook said. “We basically ask ourselves whether a company can help us accelerate a roadmap, and if they do, then we’re interested.”
Shares of the company were up 1.7 per cent in premarket trading on Friday.
Apple has tended to buy smaller firms with highly specialised technical teams to build out specific products. Its largest deal ever was its purchase of Beats Electronics for US$3 billion in 2014, followed by a US$1 billion deal to buy a modem chip business from Intel.
But now Apple is at a unique crossroads for its business. The tens of billions of dollars per year it receives from Google as payment to be the default search engine on iPhones could be undone by US courts in Google’s antitrust trial, while startups like Perplexity are in discussions with handset makers to try to dislodge Google with an AI-powered browser that would handle many search functions.
Apple executives have said in court they are considering reshaping the firm’s Safari browser with AI-powered search functions, and Bloomberg News has reported that Apple executives have discussed buying Perplexity.
Apple also said last week it plans to spend more on data centres, an area where it typically spends only a few billion dollars per year. Apple is currently using its own chip designs to handle AI requests with privacy controls that are compatible with the privacy features on its devices.
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