How serious is the problem ?
Being a spectator without involvement
Apple has been lagging behind in the AI race for too long. While all competitors are sprinting, Apple has been sitting on the sidelines, doing nothing. This indifferent attitude has wasted countless hours and made absolutely no progress.
Losing Apple’s value and competitiveness
Currently, much public opinion is urging Apple to catch up rapidly in the field of artificial intelligence, arguing that acquiring large, outstanding AI companies might be the only way to reverse its significant lag. However, I think this is oversimplifying the issue. Acquiring companies and funding are not the key.
The real challenge lies in seamlessly integrating AI features or acquired technologies into all of Apple’s products and user interfaces, leveraging Apple’s traditional strengths and demonstrating the powerful value of the Apple ecosystem—this is the sole key to Apple’s resurgence.
Apple’s legendary status in the tech world, its rise to the highest market capitalization and billions of devoted fans, stems from the decades-long development of software, hardware, user interfaces, and a unique, closed ecosystem. This isn’t about being ahead of other companies in technology or launching anything before them—this is Apple’s true competitive advantage, something that no one can copy or surpass. However, it appears Apple has been losing these unique strengths, making it no wonder it’s in its current predicament.
No progress has been made on core AI
Siri upgrades are a crucial component of Apple’s intelligence portfolio. This strategy aims to enhance the value of Apple products through AI capabilities, thereby driving sales of its hardware lineup. Otherwise, it would be difficult to convince consumers to pay a higher price for Apple products or to incentivize existing Apple users to upgrade.
The problem is, the vast majority of the exciting features Apple promised and unveiled at its 2024 Spring Software Event remain largely unseen for a year and a half. Apple has only unveiled minor, insignificant features or features riddled with errors that have drawn negative media coverage. As a result, Apple has faced a class-action lawsuit from shareholders, accusing the company of misleading investors by announcing incorrect product launch schedules.
The most significant impact is that Siri’s AI integration was delayed by another year at Apple’s spring software event in 2025. This means that Apple will need two years just to complete Siri’s AI integration, and it’s unclear whether it will be delayed again in 2026.
Siri’s initial launch was a revelation, sparking a multi-year frenzy for iPhone purchases. However, stagnation is the root of decline. As Amazon, Alphabet, Microsoft, and other mobile phone manufacturers released similar products with more powerful features than Siri, Siri was left far behind by its competitors. However, Apple remained complacent and refrained from significantly upgrading Siri for many years. Until the emergence of the AI trend in the past two years, Apple was forced to face the reality of a major upgrade and AI integration for Siri.
In response to the market and shareholders, Cook was forced to significantly restructure his AI leadership team. Siri development responsibilities were transferred from John Giannandrea, an AI expert recruited from Google in 2018, to Mike Rockwell, head of the Vision Pro project.
AI leadership almost completely decimated
To make matters worse, Apple’s head of AI was poached by Meta, and key team members followed suit. Ruoming Pang jumped ship in July. Pang accepted a signing bonus of over $100 million from Zuckerberg, and Mark Lee, Tom Gunter, Bowen Zhang, and Shuang Ma also joined Meta.
A massive exodus of AI talent! Microsoft, Google, Meta, and OpenAI are vying for talent, leaving Apple’s top team virtually empty. As of mid-August, five of Apple’s AI heads and key personnel had defected to Meta.
Capital expenditures are not being invested
Apple’s annual capital expenditures in the United States were approximately $70 billion in 2018. By February 2025, this figure is projected to reach $125 billion. In August, it increased to $150 billion annually.
The $10 billion in data center spending can barely be considered AI-related, but this $10 billion represents all Apple’s data center spending since it acquired its own data center. A closer look reveals that Apple’s annual data center spending is still extremely low, and compared to the other four tech giants, it pales in comparison.
While this may seem like an astronomical figure, the problem is that only a tiny portion of Apple’s spending has been confirmed to be devoted to AI, a fundamental difference from the other four tech giants, who devote the majority of their spending to AI. This is one of the main reasons why Apple lags far behind the other four tech giants in AI.
Investors’ perception of its AI lag
Apple is seriously lagging behind in AI development
It’s no secret that Apple has been lagging behind in the AI arms race. It’s falling further and further behind its Android competitors, and the gap appears to be widening. However, Apple may be implementing a brilliant new strategy.
Apple has been mired in a slump since 2022 and is finally showing some signs of recovery, though its AI capabilities are still somewhat lacking compared to its peers. The question is: Do AI features really matter to consumers? This can be a controversial topic, as most users likely don’t use the AI features on their Android phones, and Apple users likely don’t care.
Does Apple need to be like its peers?
I think it’s a very likely path, as Apple is already significantly behind its peers in this area. But the question is, does Apple need artificial intelligence to sell its products?
But perhaps one day, users will be able to easily use AI features, and the specific AI models on their phones will become a huge selling point. We’re not there yet, so Apple still has time to catch up in this AI arms race. However, we will eventually reach that point, and if Apple doesn’t make some drastic moves, such as acquiring an AI company, it could be left behind in the long run, even if it doesn’t feel the pain now.
Possible Steps
Cook Openly Indicates Possibility Acquisitions
During Apple’s third-quarter earnings call for fiscal year 2025, which ended on June 28, CEO Tim Cook discussed the company’s new AI strategy, which could potentially propel Apple from an AI laggard to a leader. During Apple’s quarterly earnings call, Cook stated that Apple is open to acquiring AI companies. Acquiring a leading AI company would allow Apple to rapidly accelerate its growth. He also mentioned that Apple is not focused on a specific scale, which could indicate that management may consider acquiring a larger generative AI company.
Three Top AI Startups Today
OpenAI’s latest valuation is $300 billion, Anthropic’s $170 billion, and Perplexity’s $18 billion. Apple had over $55 billion in cash and short-term investments at the end of the third quarter. OpenAI is currently collaborating with Microsoft, which holds a 49% stake. Anthropic has a close partnership with Amazon and is a major shareholder.
Acquiring Perplexity makes sense
Three reasons to acquire Perplexity:
- Perplexity is one of the few large AI companies not yet controlled by a tech giant, and it has the lowest valuation of the three.
- Perplexity has already launched an AI search engine, which aligns with Apple’s need to counter the threat posed by Google Search. A monopoly lawsuit could cost Apple $20 billion in annual revenue, as well as Apple’s long-held desire to own a search engine.
- Integrating Perplexity’s generative AI could significantly enhance the natural language capabilities of Siri and Spotlight, helping Apple compete with Google and Microsoft.
A significant premium might be required
To become a major player in the AI race, Apple has no choice but to acquire a leading AI startup. Time is running out, and there’s no time to waste. Otherwise, Apple will be permanently excluded from the biggest tech race of our time, losing out on the next decade. Wall Street believes that even if Apple offers a premium of $40 billion or more, it would still be worth acquiring.
Apple’s AI lag is a wake-up call
Admitting a significant lag
Apple currently lags in artificial intelligence, but on August 1, 2025, Cook held a rare all-hands meeting to reassure employees: “We rarely are first, but Apple will master AI.”
Disrupting Apple’s Way of Doing Things
Apple is a unique technology company, and its potential as a latecomer should not be underestimated. The company has a history of being a latecomer in certain innovative areas, but has succeeded thanks to its strong distribution network and ecosystem.
The sleeping lion has finally been awakened
On the bright side, this period of lagging behind in AI has reshaped Apple’s approach and the way its management thinks. As for whether it has finally woken up, time is of the essence, and we will soon see the answer.
Furthermore, Apple’s serious AI lag could impact the entire company’s future, its management, and its very fate.
Related articles
- “Apple’s Crisis Part 1: Apple Tariff Crisis Management Strategy Offers a Lesson for Business“
- “Apple’s Crisis Part 2: Apple’s AI is seriously lagging behind“
- “Apple top three crises since its founding“
- “The importance of cash, Apple’s experience in using cash“
- “Apple search engine, the possibility and necessity to inhouse develop“
- “Apple’s multiple LT compound capital alchemy is repurchase, 41.9% shares reduced in 12 years“
- “Apple repurchase, Nvidia capital operation, Tesla, AI bubble, Willow quantum chip, this blog turns off comments“
- “The importance of cash, Apple’s experience in using cash“
- “Apple company culture deep dive“
- “Identify good companies with corporate culture, how to do in overheated market?“
- “Why Apple plummeted by Google antitrust ruled a monopoly?“
- “The Importance of Small Language Models (SLM) in AI, how is Apple AI different from others?“
- “How does Unity, the only software partner of Apple Vision Pro, make money?“
- “How does Apple make money?“
- “Apple’s upcoming products, services, and technologies“
- “Apple’s product design philosophy, How does Apple think?“
- “Why Apple’s new features always come later? “
- “Steve Jobs’s Apple innovation gone with him?“
- “Apple’s small privacy change caused US stocks evaporate 200 billion U.S. dollars in one day“
- “Did Apple really lose the lawsuit with Epic Games?“
- “The importance of the App Store legal battle between Apple and Epic Games“
- “Why is Apple’s privacy policy so important?“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
