Why Apple’s AI Strategy Matters More Than Ever

Apple's first 50 years were defined by iconic hardware — products that changed how people worked, communicated and lived. Very few companies have reached this

and lived. Very few companies have reached this 50 year mark, let alone set the gold standard across multiple eras of technology, from personal computing to the smartphone.

But the real question now in the age of AI is, can Apple hold its dominance or will it go to someone else?

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It is that easy.

In 2011, Apple looked early.

Siri was the first mainstream voice assistant debuting years before Google Assistant and Amazon Alexa.

But as AI became the defining technology of a generation, Apple failed to turn that early advantage into lasting leadership.

They basically blew a five year lead.

It was too soon. The technology wasn't ready.

And so LLMs are bringing that now.

Meanwhile, Google built Gemini.

OpenAI built ChatGPT.

Anthropic built Claude.

And Siri, despite reaching more than a billion users never evolved into the platform that its creators envisioned. That's the hardware company mindset in

envisioned. That's the hardware company mindset in action.

We would kill to have the technology back then that exists now, so there are no further technical barriers to any part of the Siri vision that we had from the old days.

The 20 plus years that I've been investing in analyzing this company, this is the biggest delay that they've had, by orders of magnitude.

Now, Apple is making its biggest bet yet, turning to a longtime rival to power a revamped Siri.

They made it clear they don't want to build the brain. They want to leverage the brain.

brain. They want to leverage the brain.

Apple has, I think, recognized that they need partners for AI.

I don't think you could find any AI hyperscaler who has more data that would be particularly useful for the kinds of things Apple is interested in than Alphabet Google.

Apple today needs to catch up and they're working very hard to do that.

They are at a fork in the road when it comes to their products being meaningful over the long term, because empowering an AI digital assistant, if they don't solve that, somebody else will.

And that could cause a very big company today to be much smaller in the future.

Apple has to under-promise and overdeliver and stop trying to say everything's AI ready.

Apple is, buy it today and it works.

It's not a promise of the future.

It's a promise of today.

Apple's rise was built on great hardware.

It revolutionized the tech world, bringing the personal computer to the masses.

I had wanted a computer my whole life. The huge

mainframes and switches and lights all over the front panels. And I had built one of those of my own design.

panels. And I had built one of those of my own design.

So then I sat down and I wanted to make things more human. And then Steve Jobs came into town.

human. And then Steve Jobs came into town.

I told him, you got to come and see this, see the excitement. That's when Steve said, let's start a company. And we formed that little partnership on

a company. And we formed that little partnership on April 1st, 1976.

Steve Jobs was a product visionary who knew what to build and when.

He introduced iconic technology, the Mac, iPod, the iPhone.

Today, Apple is going to reinvent the phone.

He was just totally focused on product.

He was an extraordinarily intense person, and he was very, very clear about what he wanted. He wanted the best quality products.

wanted. He wanted the best quality products.

Steve was very clear that the iPhone was going to be Apple's legacy beyond his lifetime, and Tim took that and built it into an incredible powerhouse that is unstoppable.

Apple declined to make anyone available for this story, which tells you something about the company.

Even at 50, Apple would rather let the products speak for themselves.

But AI demands a different playbook than hardware.

It requires massive data, rapid iteration and a willingness to ship imperfect products that improve over time, a style that comes more naturally to Google than to Apple.

So the question hanging over the company at 50 is really whether the culture that produced the iPhone can adapt to an era where the product is never truly finished.

Tim did a tremendous job of taking it to the next level.

I think in the world of AI, it's going to need a new thought leadership.

The fact that Apple's lived through a couple of transitions, and the very first one, which was the most meaningful, was moving away from centralized computing to personal computing. And

that even became even more fine grained with mobile computing, where we actually have things in our pockets, not just in our desktops.

I think having survived that, those transitions or actually enabled them, Apple is probably wary of centralization once again when it comes to AI.

Apple got a head start with Siri and let it slip.

Siri wasn't created by Apple.

The technology was built by Stanford Research Institute cohorts, Dag Kittlaus, Adam Cheyer and Tom Gruber.

In early 2010, Siri launched as an app in the Apple Store and caught the attention of Steve Jobs.

Steve Jobs tried it a few weeks later, called us up unannounced.

We went to his house and said he wanted to buy the company.

We weren't really ready to sell.

He called me 34 days in a row.

He's calling me at midnight.

Steve Jobs had been tracking AI for a decade before Siri.

What did he see in your demo specifically that made him think that you cracked the code here?

Apparently, a bunch of people ran up and showed it to him and he, his comment was, this is the first time that I saw somebody crack AI.

He had never seen anything like that before.

Siri launched with the iPhone 4S in 2011, but jobs didn't live to fully realize his vision for what the voice assistant could be.

Steve literally was fighting to make sure that he was there to see the Siri launch.

He died the next day.

Siri was just too young, and it didn't get that attention that it needed to be able to hopefully be the vision and the execution that Steve thought it should have been.

Siri got faster and more reliable over the years, but the scope of what it could actually do for users barely expanded.

In 2018, Apple recruited John Giannandrea, one of Google's top AI leaders, to accelerate its efforts, but progress remains slow.

They lost a little bit when Steve died, and they worked to make Siri better technically.

But I also think that the number of things, for example, that Siri could do for you really never went anywhere.

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Investors have been disappointed for the broader part of two and a half years.

They missed AI and have missed it even before that.

Then, in 2022, OpenAI launched ChatGPT.

It blew Siri out of the water and completely changed what people thought was possible with AI.

Two years later, Apple partnered with OpenAI and launched Apple Intelligence.

It was the company's first major AI push, which was supposed to be a major upgrade to Siri, but it failed to take off as promised.

They made an initial push back in June of 2024 to do this with OpenAI and their GPT model.

And OpenAI's ambitions since June of 2024 have changed, and Sam Altman last December discussed about, he believed that their biggest competitor was Apple. And so this is part of the evolution of how fast

Apple. And so this is part of the evolution of how fast things are moving.

Now Apple's partnering with Google to power its artificial intelligence features, including a major Siri upgrade. The multi-year partnership will lean on

Siri upgrade. The multi-year partnership will lean on Google's Gemini and cloud technology for future Apple foundational models, with Apple reportedly paying $1 billion a year for Google's AI.

Do you think that Apple has made the right choice in partnering with Gemini for this rebooted Siri?

Absolutely. We all know that Apple tends to want to have the most important tech stacks internal, but until that day comes, I think this is the best possible partnership.

What they're getting in Gemini looks to be the best one at the moment out there, and it wouldn't surprise me if the license was very specific about Apple having control over the parts they licensed on their devices.

The Apple Alphabet relationship is complicated.

Apple's worked with Google for years.

Google pays Apple more than $20 billion annually already to be the default search on iPhone.

There used to be adversaries to the point where they sued each other. But now, like billions of dollars are

each other. But now, like billions of dollars are being shared, there's much more of a collaboration going on.

And if anything, it kind of demonstrates the flexibility of Apple over the years.

In the AI era, it's much more about co-opetition, competing and cooperating, sometimes with the same parties.

Sure, you have a frenemy relationship, but I think the world has understood what Apple's really good at and what Google's really good at.

The other standing question is whether being late and partnering actually works to Apple's advantage, versus just developing the tech on its own.

I like Apple's position as a late mover.

Apple has got to sit back and watch and go, okay, is this is a company like OpenAI going to turn into a Netscape, from like the internet days?

We weren't the first with the iPod, with an MP3 player.

They are going to be a late adopter of certain AI technologies and they're going to be able to do it in a much different way, where it doesn't require all of the infrastructure in the cloud.

There's no big downside to watching everybody else spend $100 billion and learning.

So they have three years of hindsight here to look at and to decide, what angle they're going to take.

But there is a case to be made that it puts Apple at a real disadvantage.

When you entrust Google to run such an important core part of your value proposition.

Let's say that they're the engine behind Siri.

And Siri is going to be used a lot by people, in theory. Then it's a very dangerous dependency that

in theory. Then it's a very dangerous dependency that Apple's creating. So Apple might be at the mercy of

Apple's creating. So Apple might be at the mercy of Google. This is where strategy and engineering

Google. This is where strategy and engineering come together. There has to be a plan at Apple that they

come together. There has to be a plan at Apple that they have a way out of that dependency.

Apple's scale gives it a tremendous edge.

It already has widespread reach with its devices.

ChatGPT has 800 million users, but Siri has a billion plus, even today. So the users are already there.

even today. So the users are already there.

For more than a decade, Apple has made privacy a core brand promise.

And now that decision is the single biggest structural obstacle to competing in AI.

But there is an argument that privacy could actually become Apple's AI advantage.

Along with its product ecosystem, enabling a more customized, trusted assistant that's unique to you, something that its rivals can't offer.

One of the secrets around their services business has been around a walled garden.

I think this privacy side around a walled garden on AI applications is going to be something that's valuable to consumers.

Their bigger vision is every app, every function on your phone, your Mac, everything will be AI powered.

And they make their own silicon.

Services have become one of the most profitable parts of Apple's business under Tim Cook.

2025 marked a record year reaching over $109 billion in revenue, up 14% from 2024.

The services part is about 26% now of the business.

By itself, it's a Fortune 30 company, if it were priced individually.

And Apple's strategy seems to be geared toward leveraging that.

It recently released the MacBook Neo, bringing more people into the Apple ecosystem at a lower price point.

They're trying to reach down to lower and lower price points so that the services business so you can get more users to use more services.

So what does an AI first Apple even look like?

Does it exist? And does Apple's answer involve opening up the platform, relaxing control, courting developers back because that would represent a more fundamental cultural shift than anything Cook has done. And if they don't, that tells you something

done. And if they don't, that tells you something too. In the AI era, there's intense speculation

too. In the AI era, there's intense speculation about what the next breakthrough device will look like. Meta and Google are working on smart

look like. Meta and Google are working on smart glasses. OpenAI is working with Jony Ive on a

glasses. OpenAI is working with Jony Ive on a screenless AI native device.

When you look at what Jony Ive has been charged with by Sam Altman. He's reportedly said,

Sam Altman. He's reportedly said, I want you to do for the AI era something that is as consequential as what you did for Apple in the internet era.

It might be that a kind of a pin based product might be the answer, might be a really interesting future direction for products, but it just hasn't all come together yet.

They're famously late to these, but ultimately wanting to be more comprehensive and really leverage these devices kind of fitting together.

But for now, the phone isn't going anywhere.

Apple's been rumored to be working on a foldable phone for years now, with a possible release later this year.

We're going to have displays. I think any of these pins, pens, all these pendants, all these things. I think they're all accessories to the phone because you do need that visual information to be shown visually.

I think that the device of the future is still going to be pretty much the handheld touchscreen device.

The idea of having a trusted digital assistant that can look over multiple apps, that can power apps that can basically take away consumers some of their mundane tasks and automate them, I think is really powerful.

And I think Apple and Google are probably the two companies that have the biggest opportunity there.

And Apple's play is around the safety and the security side, which is unique relative to Google.

So what if Apple fails?

Let's say Apple doesn't figure AI out.

In that case, I think you basically have a company that becomes like Yahoo.

They were early in search, but they really weren't successful at evolving at the pace and search that they needed to, to kind of win that key market share and distribution. It's very rare that a company can kind of regain their momentum once they have lost that.

But if there's one thing that Apple's 50 year history shows us, it's that the company has a way of finding its moment.

The greatest successes came when they really aimed for very big breakthroughs, and that the small stuff tended to be failures.

The big stuff they get right and they're careful about choosing what big stuff to chase.

I think the first company that can bring together the right experience, the right AI platform for knowing and doing, and the right business model for both users and partners, they will actually be the dominant technology company for this next AI age.

They've never been first at this stuff.

They've always just made it better and perfected it.

Time will tell, and I think the next two years are going to be probably the most exciting couple of years in Apple than we've seen over the last 20 years.