Apple faces pressure to show off AI following splashy events at OpenAI, Google and Microsoft

For years, Apple avoided using the acronym AI when discussing its products. Not anymore.

The surge in generative AI, led by OpenAI in late 2022, has boosted Nvidia’s market capitalization to $3 trillion and shifted priorities at Microsoft, Google, and Amazon to integrate the technology into their core services.

Investors and customers are now eager to see what the iPhone maker has in store.

Apple’s Worldwide Developers Conference (WWDC), which begins on Monday at the company’s Cupertino, California campus, will feature new AI features. Apple’s CEO Tim Cook has hinted at “big plans,” a departure from the company’s traditional policy of not revealing product details before launch.

WWDC is not usually a major investor attraction. On the first day, the company typically announces annual updates to its iOS, iPadOS, WatchOS, and MacOS software during a two-hour videotaped keynote launch event hosted by Cook. This year’s presentation will be shown at Apple’s headquarters. App developers then have a week of parties and virtual workshops to learn about the new Apple software.

Apple fans get a preview of the software that will be available on iPhones. Developers can start updating their apps. New hardware products, if they appear at all, are not on display.

However, this year, everyone will be listening for the most hyped acronym in technology.

With over 1 billion iPhones in use, Wall Street wants to know what AI features will make the iPhone more competitive against Android rivals, as well as how the company plans to justify its investment in developing its own chips.

Investors have rewarded companies that demonstrate a clear AI strategy and vision. Nvidia, the primary manufacturer of AI processors, has seen its stock price triple over the last year. Microsoft, which is aggressively incorporating OpenAI into its products, is up 28% in the last year. Apple is only up 9% over the same period, and the other two companies have surpassed it in market capitalization.

“This is the most important event for Cook and Cupertino in over a decade,” Wedbush analyst Dan Ives told CNBC. “The AI strategy is the missing piece in the growth puzzle for Apple and this event needs to be a showstopper and not a shrug-the-shoulders event.”

“At WWDC, we expect Apple to unveil its long-term vision for implementing generative AI across its diverse ecosystem of personal devices,” said Gil Luria, an analyst at D.A. Davidson, in a note this week. “We believe that the impact of generative AI to Apple’s business is one of the most profound in all of technology, and unlike much of the innovation in AI that’s impacting the developer or enterprise, Apple has a clear opportunity to reach billions of consumer devices with generative AI functionality.”

Upgrading Siri
Last month, OpenAI revealed ChatGPT-4o, a voice mode for its AI software.

In a brief demonstration, OpenAI researchers held an iPhone and spoke directly to the bot within the ChatGPT app, which could perform impressions, speak fluidly, and even sing. The conversation was quick, the bot offered advice, and the voice sounded human. Additional demonstrations at the live event featured the bot singing, teaching trigonometry, translating, and telling jokes.

Apple users and pundits immediately recognized that OpenAI had demonstrated a preview of what Apple’s Siri could become in the future. Apple’s voice assistant debuted in 2011 and has since developed a reputation for being ineffective. It is rigid and can only answer a small proportion of well-defined queries, which is due in part to its reliance on older machine learning techniques.

Apple may collaborate with OpenAI to upgrade Siri next week. According to The New York Times, it has also discussed licensing chatbot technology from other companies, such as Google and Cohere.

Apple declined to comment on the OpenAI partnership.

One possibility is that Apple’s new Siri will not compete directly with fully functional chatbots, but will instead improve its existing features and delegate queries that can only be answered by a chatbot to a partner. It’s similar to how Apple’s Spotlight search and Siri work today. Apple’s system attempts to answer the question, but if it fails, it refers to Google. That agreement is part of a deal worth $18 billion per year for Apple.

Apple may also hesitate to fully embrace an OpenAI partnership or chatbot. One reason is that a malfunctioning chatbot could result in embarrassing headlines and undermine the company’s emphasis on user privacy and data control.

“Data security will be a key advantage for the company, and we expect them to spend time talking about their privacy efforts during WWDC as well,” Citi analyst Atif Malik said in a recent note.

OpenAI’s technology is based on web scraping, and ChatGPT user interactions are used to improve the model itself, which may violate some of Apple’s privacy policies.

Large language models, such as OpenAI’s, continue to have issues with inaccuracies or “hallucinations,” as when Google’s search AI claimed last month that President Barack Obama was the first Muslim president. When OpenAI CEO Sam Altman denied accusations from actress Scarlett Johansson that OpenAI’s voice mode had stolen her voice, he sparked a tense societal debate about deepfakes and deception. This is the type of conflict that Apple executives prefer to avoid.

Efficient versus Large
Outside of Apple, AI has become reliant on large server farms with powerful Nvidia processors and terabytes of memory to crunch numbers.

In contrast, Apple wants its AI features to run on battery-powered devices such as iPhones, iPads, and Macs. Cook emphasized Apple’s own chips as superior for running AI models.

“We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple’s unique combination of seamless hardware, software, and services integration, groundbreaking Apple Silicon with our industry-leading neural engines, and our unwavering focus on privacy,” Cook stated during an earnings call in May.

In a note this month, Samik Chatterjee, an analyst at JPMorgan, wrote, “We expect Apple’s presentation at WWDC keynote to be focused on the features and on-device capabilities, as well as the GenAI models being run on-device to enable those features.”

In April, Apple published research on AI models dubbed “efficient language models” that could run on a phone. Microsoft has also published research on the same topic. Apple’s “OpenELM” model has 1.1 billion parameters, which is significantly less than OpenAI’s 2020 GPT-3 model with 175 billion and Meta’s Llama with 70 billion parameters.

In the paper, Apple’s researchers benchmarked the model on a MacBook Pro laptop running Apple’s M2 Max chip, demonstrating that these efficient models do not always require cloud connectivity. This can improve response time while also providing a layer of privacy by allowing sensitive questions to be answered on the device rather than being sent back to Apple servers.

According to Bloomberg, some of the features built into Apple’s software could include providing users with a summary of missed text messages, creating images for new emojis, completing code in the company’s development software Xcode, and drafting email responses.

According to Bloomberg, Apple may also decide to load its M2 Ultra chips into its data centers to process AI queries that require more horsepower.

WWDC won’t be solely about AI.

The company has over 2.2 billion devices in use, and customers want better software and new apps.

One potential upgrade could be Apple’s adoption of RCS, an improvement to the older SMS text messaging system. Apple’s messages app routes texts between iPhones to its own iMessage system, which displays conversations in blue bubbles. When an iPhone texts an Android phone, the bubble turns green. Many features, including typing notifications, are not available.

Google led the development of RCS, which added encryption and other features to text messages. Apple confirmed late last year that it would add RCS support to iMessage. The launch of iOS 18 would be an appropriate time to showcase its work.

The conference will also mark the first anniversary of Apple’s unveiling of the Vision Pro, a virtual and augmented reality headset that was released in the United States in February. Apple could announce plans to expand to more countries, including China and the United Kingdom.

Apple stated in its WWDC announcement that the Vision Pro would be in the spotlight. Vision Pro is currently running the first version of its operating system, and core features like the Persona videoconferencing simulation are still in beta.

Apple will offer some of its virtual sessions in 3D to users with a Vision Pro at the event.