Tech evolution: Did Apple blink or think different in the race for artificial intelligence?

The latter two are seen as AI infrastructure leaders. Microsoft, which has invested $13 billion in OpenAI, has embedded its generative models into Azure, Office and GitHub. Nvidia, whose GPUs power nearly every major large language model, has enviable profit margins. Their market caps reflect their AI heft: both touch $3.7 trillion, while Apple lags at around $3 trillion. So, did Apple blink? 

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Apple is more of a consumer hardware and services major than an AI platform business. It hasn’t made AI central to its identity in the same way as its Big Tech peers. Its playbook is also different. With its launch of Apple Intelligence, for instance, it signalled an intent to integrate AI deeply into its devices and services. 

It has focused on privacy, security and user experience—redrafting text, generating images and smarter notifications—through on-device language models. For more complex tasks, it taps OpenAI’s GPT-4o, with plans to offer users the choice of other models like Google’s Gemini. Also, often overlooked is the fact that Apple has made more AI-related acquisitions than its peers—over 30, including Turi, Xnor.ai and  Vilynx.

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These deals did not generate a buzz but have strengthened core features in Siri, Photos and on-device intelligence. Apple has always absorbed technology to serve its products, a strategy evident in recent reports of a plan to acquire Perplexity AI (denied by the latter). 

Google currently pays Apple an estimated $20 billion a year to remain the default search engine on Safari, which takes iPhone users online. If regulators nix that deal, Apple may need a search alternative—like Perplexity. Even so, Apple’s grip on its market looks firm for now. 

In 2024, its services business crossed $100 billion in revenue, with over a billion paid subscriptions across iCloud, Music, TV+, App Store and more. These services run at a 74% gross margin, far higher than the 36% it earns from hardware. This ‘services flywheel,’ with subscriptions and retention driven by device sales, grants Apple a strong user base to gradually familiarize with curated marvels of AI. 

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Apple’s rivals Google and Meta have their own challenges. Google’s $150 billion search ad business is vulnerable to its own AI products. Meta is investing big money in open-source AI and the metaverse. But monetization remains elusive. Both rely on ad revenue, exposing them to shifts in user behaviour and competition. 

In contrast, Apple’s AI strategy does not threaten its core, but enhances it. By waiting for GenAI and AI-on-devices to mature, Apple may be  well placed to integrate both across billions of devices. As a trusted brand, it has an edge that goes beyond technology. 

Still, risks remain. Its dependence on others for foundational tech could be a constraint. If GenAI becomes as basic as operating systems, Apple may need to invest more deeply—via R&D or by buying a model company like Cohere, Mistral or Anthropic. Meanwhile, Apple is focusing on the user experience and folding AI into products that people love. This privacy-first, user-centric approach seems prompted by its core philosophy. Even if Apple blinked, that could see it through.