Apple CEO Tim Cook arrives for an official State Dinner in honor of India’s Prime Minister Narendra Modi, at the White House in Washington, DC, on June 22, 2023.
Stefani Reynolds | AFP | Getty Images
The most powerful technology companies simply cannot stop talking about artificial intelligence, and in particular, the “generative AI” flavor that can create human-like text, images, and code.
During calls after this week’s earnings reports, Alphabet CEO Sundar Pichai and his team said “AI” 66 times. Microsoft CEO Satya Nadella and his execs said it 47 times. And on Wednesday, Meta CEO Mark Zuckerberg and the Facebook executive team said the magic phrase 42 times, according to a CNBC analysis of transcripts.
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But Apple barely talks about artificial intelligence, and you shouldn’t expect to hear much about it during the company’s earnings next week.
Its sober approach to the new technology contrasts deeply with its rivals, which are stoking excitement and elevating expectations every chance they get.
During May’s Apple earnings call, CEO Tim Cook only said “AI” twice, and that was in response to a question. During Apple’s two-hour software launch event in June, it never said the phrase, although it announced several new features powered with AI.
Apple execs instead use the phrase “machine learning,” which is more popular with academics and practitioners. Apple execs also prefer to talk about what software does for the user, such as organizing their photos, improving their typing, or filling out fields in a PDF, as opposed to the technology that makes all that possible.
Apple’s approach to AI as a core underlying component instead of the future of computing represents a way to present the technology to its consumers. Apple’s AI works in the background. And the company doesn’t yell about it the way some of the other companies do because it doesn’t need to.
Microsoft, Google and Meta are rallying everyone around AI, even though the future is murky
Google launched Bard AI, it’s own chatbot to rival Microsoft and OpenAI’s ChatGPT.
Jonathan Raa | Nurphoto | Getty Images
A closer look at executive remarks this week from earnings calls shows that while Meta, Microsoft, and Google are eager to sell the shovels for the AI gold rush, such as cloud services and developer tools, it’s still unclear how AI could change their most important products and when it could start bolstering balance sheets.
Google, for example, has announced its plans to revamp its search engine using an AI model called Search Generative Experience. Microsoft’s biggest new initiative is a $30-per-month “Copilot” subscription that integrates generated text or code from partner OpenAI’s ChatGPT into Word, Powerpoint, and other apps. Meta’s most recent investment in AI technology is its own large language model it calls LLaMA, which could underpin new kinds of social media chatbots or automatically generate online ads.
Meanwhile, Apple still makes the bulk of its money from iPhones, which generated $51.3 billion of its $94.84 billion in revenue during the company’s second fiscal quarter. Why talk a big AI game?
Besides, mega-cap tech companies signaled to investors earlier this week in earnings calls that the rollout of AI products could take a while.
In Microsoft’s case, Nadella tempered investor expectations for Copilot, signaling that growth would take time, and said that its rollout would be “gradual.”
It could take until next year before investors understand how the Copilot subscription affects the company’s revenue. “In the second half of the next fiscal year, we’ll start getting some of the real revenue signal from it,” Nadella said.
Google and Pichai say that the company’s text-generating AI models will make its search engine better and could even answer questions that normal Google search can’t. From a business perspective, Pichai said, generative AI used for creating and serving ads will “supercharge” the company’s existing ads business, and there are “opportunities” for new kinds of ads with AI-generated search.
But Pichai still said it’s still “early days” for the new AI-powered search, and later, when pressed about how SGE might increase usage of the search engine, and therefore increase revenue, he said the company was experimenting.
“I think we are definitely headed in the right direction, and we can see it in our metrics and the feedback we’re getting from our users as well,” Pichai said.
Zuckerberg was effusive about AI technology and its applications in virtual reality, ad targeting, and recommending content from accounts users don’t follow.
He was particularly optimistic about a concept called “AI agents,” where software would be able to message business customers automatically without a human involved, or act as a coach, or be a personal assistant.
Still, Zuckerberg admitted he didn’t know how many people would use the new AI features.
“The reality is, we just don’t know how quickly these will scale,” Zuckerberg said. He said Meta was debating internally how much it should spend on servers for AI.
The peak of the hype cycle
Microsoft – Bing seen on mobile with ChatGPT4 on screen, seen in this photo illustration. On 12 March 2023 in Brussels, Belgium.
Jonathan Raa | Nurphoto | Getty Images
The slow rollout of revenue-generating AI products from Big Tech matters because many people in the technology industry believe that new foundational technologies go through a “hype cycle” based on research from analysis firm Gartner.
When a new technology is introduced, according to the hype cycle model, it gains lots of attention and investment as it reaches a “peak of inflated expectations.” But, as the deployment of the tech moves slower than initially expected, enthusiasm and investment dry up, in a “trough of disillusionment,” before maturing and becoming productive.
For now, shovel-makers and people seeking investment capital are benefiting from the AI boom. Nvidia stock has risen 220% so far in 2023 as investors have realized its GPUs are essential for the technology. Venture capital investment in AI startups has boomed, and many of those dollars are going to Nvidia for computer capacity, and to cloud providers for access to AI models.
But if everyday consumer applications for AI don’t catch on, then many AI companies could slip into the trough of disillusionment again. Analysts found earlier this month, for example, that downloads for OpenAI’s iPhone app slowed earlier this month after launching in May.
Some analysts are starting to understand that an investment opportunity based on new AI products won’t be immediate and that the costs could stack up.
“We cautioned investors that that process of translating early demand to large-scale implementations and recognized revenue will be a multi-year trend rather than an instantaneous flip of a switch,” JPMorgan analyst Mark Murphy wrote this week.
“We recommend investors invest elsewhere until Metaverse, Reels, Threads, Quest and Generative AI investments become accretive (if ever) to META’s [return on invested capital], rather than dilutive,” Needham’s Laura Martin wrote in a note.
UBS analyst Lloyd Walmsley wrote this week that Generative AI was still an “overhang” over Google.
“Management expressed optimism around the ability to solve for ‘deeper and broader’ use cases with Search Generative Experience (SGE), but we do not believe the company is out of the woods with management still describing monetization as having a ‘number of experiments in flight including (for) ads,'” Walmsley wrote.
Apple’s a product company
Apple iPhones are displayed at an Apple store in Chicago on Nov. 28, 2022.
Scott Olson | Getty Images
When Apple reports its earnings next week, analysts will likely press it on its plans for AI, given the industry-wide obsession, and especially after a recent Bloomberg report that said the company was developing a ChatGPT-like language model internally.
Last month, Apple announced new iPhone keyboard software that uses the same transformers architecture as GPT, showing that it has substantial internal development of AI models. It just doesn’t like to talk about products that aren’t out on the market yet to stoke investor anticipation.
Apple is unlikely to discuss AI at length next week as its mega-cap rivals did this week. During Apple’s earnings call in May, when asked about the technology, Cook quickly moved the conversation back to the company’s products and features.
“We view AI as huge and we’ll continue weaving it in our products on a very thoughtful basis,” Cook said.
Meta CEO Mark Zuckerberg appears at the Meta Connect event in Menlo Park, California, Sept. 25, 2024.
David Paul Morris | Bloomberg | Getty Images
Meta CEO Mark Zuckerberg slammed rival tech giant Apple for lackluster innovation efforts and “random rules” in a lengthy podcast interview on Friday.
“On the one hand, [the iPhone has] been great, because now pretty much everyone in the world has a phone, and that’s kind of what enables pretty amazing things,” Zuckerberg said in an episode of the “Joe Rogan Experience.” “But on the other hand … they have used that platform to put in place a lot of rules that I think feel arbitrary and [I] feel like they haven’t really invented anything great in a while. It’s like Steve Jobs invented the iPhone, and now they’re just kind of sitting on it 20 years later.”
Zuckerberg added that he thought iPhone sales were struggling because consumers are taking longer to upgrade their phones because new models aren’t big improvements from prior iterations.
“So how are they making more money as a company? Well, they do it by basically, like, squeezing people, and, like you’re saying, having this 30% tax on developers by getting you to buy more peripherals and things that plug into it,” Zuckerberg said. “You know, they build stuff like Air Pods, which are cool, but they’ve just thoroughly hamstrung the ability for anyone else to build something that can connect to the iPhone in the same way.”
Apple defends itself from pushback from other companies by saying that it doesn’t want to violate consumers’ privacy and security, according to Zuckerberg. But he said that the problem would be solved if Apple fixed its protocol, like building better security and using encryption.
“It’s insecure because you didn’t build any security into it. And then now you’re using that as a justification for why only your product can connect in an easy way,” Zuckerberg said.
Zuckerberg said that if Apple stopped applying its “random rules,” Meta’s profit would double.
He also took shots at Apple’s Vision Pro headset, which had disappointing U.S. sales. Meta sells its own virtual headsets called the Meta Quest.
“I think the Vision Pro is, I think, one of the bigger swings at doing a new thing that they tried in a while,” Zuckerberg said. “And I don’t want to give them too hard of a time on it, because we do a lot of things where the first version isn’t that good, and you want to kind of judge the third version of it. But I mean, the V1, it definitely did not hit it out of the park.”
“I heard it’s really good for watching movies,” he added.
Apple did not immediately respond to a request for comment from CNBC.
Mark Zuckerberg’s announcement this week that Meta would pivot its moderation policies to allow more “free expression” was widely viewed as the company’s latest effort to appease President-elect Donald Trump.
More than any of its Silicon Valley peers, Meta has taken numerous public steps to make amends with Trump since his election victory in November.
That follows a highly contentious four years between the two during Trump’s first term in office, which ended with Facebook — similar to other social media companies — banning Trump from its platform.
As recently as March, Trump was using his preferred nickname of “Zuckerschmuck” when talking about Meta’s CEO and declaring that Facebook was an “enemy of the people.”
With Meta now positioning itself to be a key player in artificial intelligence, Zuckerberg recognizes the need for White House support as his company builds data centers and pursues policies that will allow it to fulfill its lofty ambitions, according to people familiar with the company’s plans who asked not to be named because they weren’t authorized to speak on the matter.
“Even though Facebook is as powerful as it is, it still had to bend the knee to Trump,” said Brian Boland, a former Facebook vice president, who left the company in 2020.
Meta declined to comment for this article.
In Tuesday’s announcement, Zuckerberg said Meta will end third-party fact-checking, remove restrictions on topics such as immigration and gender identity and bring political content back to users’ feeds. Zuckerberg pitched the sweeping policy changes as key to stabilizing Meta’s content-moderation apparatus, which he said had “reached a point where it’s just too many mistakes and too much censorship.”
The policy change was the latest strategic shift Meta has taken to buddy up with Trump and Republicans since Election Day.
A day earlier, Meta announced that UFC CEO Dana White, a longtime Trump friend, is joining the company’s board.
And last week, Meta announced that it was replacing Nick Clegg, its president of global affairs, with Joel Kaplan, who had been the company’s policy vice president. Clegg previously had a career in British politics with the Liberal Democrats party, including as a deputy prime minister, while Kaplan was a White House deputy chief of staff under former President George W. Bush.
Kaplan, who joined Meta in 2011 when it was still known as Facebook, has longstanding ties to the Republican Party and once worked as a law clerk for the late conservative Supreme Court Justice Antonin Scalia. In December, Kaplan posted photos on Facebook of himself with Vice President-elect JD Vance and Trump during their visit to the New York Stock Exchange.
Joel Kaplan, Facebook’s vice president of global policy, on April 17, 2018.
Niall Carson | PA Images | Getty Images
Many Meta employees criticized the policy change internally, with some saying the company is absolving itself of its responsibility to create a safe platform. Current and former employees also expressed concern that marginalized communities could face more online abuse due to the new policy, which is set to take effect over the coming weeks.
Despite the backlash from employees, people familiar with the company’s thinking said Meta is more willing to make these kinds of moves after laying off 21,000 employees, or nearly a quarter of its workforce, in 2022 and 2023.
Those cuts affected much of Meta’s civic integrity and trust and safety teams. The civic integrity group was the closest thing the company had to a white-collar union, with members willing to push back against certain policy decisions, former employees said. Since the job cuts, Zuckerberg faces less friction when making broad policy changes, the people said.
Zuckerberg’s overtures to Trump began in the months leading up to the election.
Following the first assassination attempt on Trump in July, Zuckerberg called the photo of Trump raising his fist with blood running down his face “one of the most badass things I’ve ever seen in my life.”
A month later, Zuckerberg penned a letter to the House Judiciary Committee alleging that the Biden administration had pressured Meta’s teams to censor certain Covid-19 content.
“I believe the government pressure was wrong, and I regret that we were not more outspoken about it,” he wrote.
After Trump’s presidential victory, Zuckerberg joined several other technology executives who visited the president-elect’s Mar-a-Lago resort in Florida. Meta also donated $1 million to Trump’s inaugural fund.
On Friday, Meta revealed to its workforce in a memo obtained by CNBC that it intends to shutter several internal programs related to diversity and inclusion in its hiring process, representing another Trump-friendly move.
The previous day, some details of the company’s new relaxed content-moderation guidelines were published by the news site The Intercept, showing the kind of offensive rhetoric that Meta’s new policy would now allow, including statements such as “Migrants are no better than vomit” and “I bet Jorge’s the one who stole my backpack after track practice today. Immigrants are all thieves.”
Recalibrating for Trump
Zuckerberg, who has been dragged to Washington eight times to testify before congressional committees during the last two administrations, wants to be perceived as someone who can work with Trump and the Republican Party, people familiar with the matter said.
Though Meta’s content-policy updates caught many of its employees and fact-checking partners by surprise, a small group of executives were formulating the plans in the aftermath of the U.S. election results. By New Year’s Day, leadership began planning the public announcements of its policy change, the people said.
Meta typically undergoes major “recalibrations” after prominent U.S. elections, said Katie Harbath, a former Facebook policy director and CEO of tech consulting firm Anchor Change. When the country undergoes a change in power, Meta adjusts its policies to best suit its business and reputational needs based on the political landscape, Harbath said.
“In 2028, they’ll recalibrate again,” she said.
After the 2016 election and Trump’s first victory, for example, Zuckerberg toured the U.S. to meet people in states he hadn’t previously visited. He published a 6,000-word manifesto emphasizing the need for Facebook to build more community.
The social media company faced harsh criticism about fake news and Russian election interference on its platforms after the 2016 election.
Following the 2020 election, during the heart of the pandemic, Meta took a harder stand on Covid-19 content, with a policy executive saying in 2021 that the “amount of COVID-19 vaccine misinformation that violates our policies is too much by our standards.” Those efforts may have appeased the Biden administration, but it drew the ire of Republicans.
Meta is once again reacting to the moment, Harbath said.
“There wasn’t a business risk here in Silicon Valley to be more right-leaning,” Harbath said.
While Trump has offered few specific policy proposals for his second administration, Meta has plenty at stake.
The White House could create more relaxed AI regulations compared with those in the European Union, where Meta says harsh restrictions have resulted in the company not releasing some of its more advanced AI technologies. Meta, like other tech giants, also needs more massive data centers and cutting-edge computer chips to help train and run their advanced AI models.
“There’s a business benefit to having Republicans win, because they are traditionally less regulatory,” Harbath said.
Meta’s CEO Mark Zuckerberg reacts as he testifies during the Senate Judiciary Committee hearing on online child sexual exploitation at the U.S. Capitol in Washington, U.S., January 31, 2024.
Evelyn Hockstein | Reuters
Meta isn’t alone in trying to cozy up to Trump. But the extreme measures the company is taking reflects a particular level of animus expressed by Trump over the years.
Trump has accused Meta of censorship and has expressed resentment over the company’s two-year suspension of his Facebook and Instagram accounts following the Jan. 6 attack on the Capitol.
In July 2024, Trump posted on Truth Social that he intended to “pursue Election Fraudsters at levels never seen before, and they will be sent to prison for long periods of time,” adding “ZUCKERBUCKS, be careful!” Trump reiterated that statement in his book, “Save America,” writing that Zuckerberg plotted against him during the 2020 election and that the Meta CEO would “spend the rest of his life in prison” if it happened again.
Meta spends $14 million annually on providing personal security for Zuckerberg and his family, according to the company’s 2024 proxy statement. As part of that security, the company analyzes any threats or perceived threats against its CEO, according to a person familiar with the matter. Those threats are cataloged, analyzed and dissected by Meta’s multitude of security teams.
After Trump’s comments, Meta’s security teams analyzed how Trump could weaponize the Justice Department and the country’s intelligence agencies against Zuckerberg and what it would cost the company to defend its CEO against a sitting president, said the person, who asked not to be named because of confidentiality.
Meta’s efforts to appease the incoming president bring their own risks.
After Zuckerberg announced the new speech policy Tuesday, Boland, the former executive, was among a number of users who took to Meta’s Threads service to tell their followers that they were quitting Facebook.
“Last post before deleting,” Boland wrote in his post.
Before the post could be seen by any of his Threads followers, Meta’s content moderation system had taken it down, citing cybersecurity reasons.
Boland told CNBC in an interview that he couldn’t help but chuckle at the situation.
“It’s deeply ironic,” Boland said.
— CNBC’s Salvador Rodriguez contributed to this report.
Apple is losing market share in China due to declining iPhone shipments, supply chain analyst Ming-Chi Kuo wrote in a report on Friday. The stock slid 2.4%.
“Apple has adopted a cautious stance when discussing 2025 iPhone production plans with key suppliers,” Kuo, an analyst at TF Securities, wrote in the post. He added that despite the expected launch of the new iPhone SE 4, shipments are expected to decline 6% year over year for the first half of 2025.
Kuo expects Apple’s market share to continue to slide, as two of the coming iPhones are so thin that they likely will only support eSIM, which the Chinese market currently does not promote.
“These two models could face shipping momentum challenges unless their design is modified,” he wrote.
Kuo wrote that in December, overall smartphone shipments in China were flat from a year earlier, but iPhone shipments dropped 10% to 12%.
There is also “no evidence” that Apple Intelligence, the company’s on-device artificial intelligence offering, is driving hardware upgrades or services revenue, according to Kuo. He wrote that the feature “has not boosted iPhone replacement demand,” according to a supply chain survey he conducted, and added that in his view, the feature’s appeal “has significantly declined compared to cloud-based AI services, which have advanced rapidly in subsequent months.”
Apple’s estimated iPhone shipments total about 220 million units for 2024 and between about 220 million and 225 million for this year, Kuo wrote. That is “below the market consensus of 240 million or more,” he wrote.
Apple did not immediately respond to CNBC’s request for comment.