Apple’s new Vision Pro virtual reality headset is displayed during Apple’s Worldwide Developers Conference (WWDC) at the Apple Park campus in Cupertino, California, on June 5, 2023.
Josh Edelson | Afp | Getty Images
For years, Apple avoided using the acronym AI when talking about its products. Not anymore.
The boom in generative artificial intelligence, spawned in late 2022 by OpenAI, has been the biggest story in the tech industry of late, lifting chipmaker Nvidia to a $3 trillion market cap and causing a major shifting of priorities at Microsoft, Google and Amazon, which are all racing to add the technology into their core services.
Investors and customers now want to see what the iPhone maker has in store.
New AI features are coming at Apple’s Worldwide Developers Conference (WWDC), which takes place on Monday at Apple’s campus in Cupertino, California. Apple CEO Tim Cook has teased “big plans,” a change of approach for a company that doesn’t like to talk about products before they’re released.
WWDC isn’t typically a major investor attraction. On the first day, the company announces annual updates to its iOS, iPadOS, WatchOS and MacOS software in what’s usually a two-hour videotaped keynote launch event emceed by Cook. This year, the presentation will be screened at Apple’s headquarters. App developers then get a week of parties and virtual workshops where they learn about the new Apple software.
Apple fans get a preview of the software coming to iPhones. Developers can get to work updating their apps. New hardware products, if they appear at all, are not the showcase.
But this year, everyone will be listening for the most hyped acronym in tech.
With more than 1 billion iPhones in use, Wall Street wants to hear what AI features are going to make the iPhone more competitive against Android rivals and how the company can justify its investment in developing its own chips.
Investors have rewarded companies that show a clear AI strategy and vision. Nvidia, the primary maker of AI processors, has seen its stock price triple in the past year. Microsoft, which is aggressively incorporating OpenAI into its products, is up 28% over the past year. Apple is only up 9% over that same period, and has seen the other two companies surpass it in market cap.
“This is the most important event for Cook and Cupertino in over a decade,” Dan Ives, an analyst at Wedbush, 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.”
Taking the stage will be executives including software chief Craig Federighi, who will likely address the real life uses of Apple’s AI, whether it should be run locally or in massive cloud clusters and what should be built into the operating system versus distributed in an app.
Privacy is also a key issue, and attendees will likely want to know how Apple can deploy the data-hungry technology without compromising user privacy, a centerpiece of the company’s marketing for over half a decade.
“At WWDC, we expect Apple to unveil its long-term vision around its implementation of generative AI throughout its diverse ecosystem of personal devices,” wrote 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 a voice mode for its AI software called ChatGPT-4o.
In a short demo, OpenAI researchers held an iPhone and spoke directly to the bot inside the ChatGPT app, which was able to do impressions, speak fluidly and even sing. The conversation was snappy, the bot gave advice and the voice sounded like a human. Further demos at the live event showed the bot singing, teaching trigonometry, translating and telling jokes.
Apple users and pundits immediately understood that OpenAI had demoed a preview of what Apple’s Siri could be in the future. Apple’s voice assistant debuted in 2011 and since has gained a reputation for not being useful. It’s rigid, only able to answer a small proportion of well-defined queries, partially because it’s based on older machine learning techniques.
Apple could team up with OpenAI to upgrade Siri next week. It’s been discussing licensing chatbot technology from other companies, too, including Google and Cohere, according to a report from The New York Times.
Apple declined to comment on an OpenAI partnership.
One possibility is that Apple’s new Siri won’t compete directly with fully featured chatbots, but will improve its current features, and toss off queries that can only be answered by a chatbot to a partner. It’s close to how Apple’s Spotlight search and Siri work now. Apple’s system tries to answer the question, but if it can’t, it turns to Google. That agreement is part of a deal worth $18 billion per year to Apple.
Apple might also shy away from a full-throated embrace of an OpenAI partnership or chatbot. One reason is that a malfunctioning chatbot could generate embarrassing headlines, and could undermine the company’s emphasis on user privacy and personal control of user data.
“Data security will be a key advantage for the company and we expect them to spend time talking about their privacy efforts during the 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, a technique that could violate some of Apple’s privacy principles.
Large language models like OpenAI’s still have problems with inaccuracies or “hallucinations,” like when Google’s search AI said last month that President Barack Obama was the first Muslim president. OpenAI CEO Sam Altman recently found himself in the middle of a thorny societal debate about deepfakes and deception when he denied accusations from actress Scarlett Johansson that OpenAI’s voice mode had ripped off her voice. It’s the kind of conflict that Apple executives prefer to avoid.
Efficient vs. large
Apple senior vice president of software engineering Craig Federighi speaks before the start of the Apple Worldwide Developers Conference at its headquarters on June 05, 2023 in Cupertino, California. Apple CEO Tim Cook kicked off the annual WWDC23 developer conference.
Outside of Apple, AI has become reliant on big server farms using powerful Nvidia processors paired with terabytes of memory to crunch numbers.
Apple, by contrast, wants its AI features to run on iPhones, and iPads, and Macs, which operate on battery power. Cook has highlighted 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 told investors in May on an earnings call.
Samik Chatterjee, an analyst at JPMorgan, wrote in a note this month that, “We expect Apple’s presentation at WWDC keynote to be focused on the features and the on-device capabilities as well as the GenAI models being run on-device to enable those features.”
In April, Apple published research about AI models it calls “efficient language models” that would be able to run on a phone. Microsoft is also publishing research on the same concept. One of Apple’s “OpenELM” models has 1.1 billion parameters, or weights — far smaller than OpenAI’s 2020 GPT-3 model which has 175 billion parameters, and smaller even than the 70 billion parameters in one version of Meta’s Llama, which is one of the most widely used language models.
In the paper, Apple’s researchers benchmarked the model on a MacBook Pro laptop running Apple’s M2 Max chip, showing that these efficient models don’t necessarily need to connect to the cloud. That can improve response speed, and provide a layer of privacy, because sensitive questions could be answered on the device itself, rather than being sent back to Apple servers.
Some of the features built into Apple’s software could include providing users a summary of their missed text messages, image generation for new emojis, code completing in the company’s development software Xcode, or drafting email responses, according to Bloomberg.
Apple could also decide to load up its M2 Ultra chips in its data centers to process AI queries that need more horsepower, Bloomberg reported.
Green bubbles and Vision Pro
A customer uses Apple’s Vision Pro headset at the Apple Fifth Avenue store in Manhattan in New York City, U.S., February 2, 2024.
Brendan McDermid | Reuters
WWDC won’t strictly be about AI.
The company has more than 2.2 billion devices in use, and customers want improved software and new apps.
One potential upgrade could be Apple’s adoption of RCS, an improvement to the older system of text messaging known as SMS. Apple’s messages app diverts texts between iPhones to its own iMessage system, which displays conversations as blue bubbles. When an iPhone texts an Android phone, the bubble is green. Many features such as typing notifications aren’t available.
Google led development of RCS, adding encryption and other features to text messaging. Late last year Apple confirmed that it would add support for RCS alongside iMessage. The debut of iOS 18 would be the logical time to show its work.
The conference will also be the first anniversary of Apple’s reveal of the Vision Pro, its virtual and augmented reality headset, which was released in the U.S. in February. Apple could announce its expansion to more countries, including China and the U.K.
Apple said in its WWDC announcement that the Vision Pro would be in the spotlight. Vision Pro is currently on the first version of its operating system, and core features, such as its Persona videoconferencing simulation, are still in beta.
For users with a Vision Pro, Apple will offer some of its virtual sessions at the event in a 3D environment.
A logo hangs on the building of the Beijing branch of Semiconductor Manufacturing International Corporation (SMIC) on December 4, 2020 in Beijing, China.
After trading on Thursday, the company reported a first-quarter revenue of $2.24 billion, up about 28% from a year earlier. Meanwhile, profit attributable to shareholders surged 162% year on year to $188 million.
However, both figures missed LSEG mean estimates of $2.34 billion in revenue and $225.1 million in net income, as well as the company’s own forecasts.
During an earnings call Friday, an SMIC representative said the earnings missed original guidance due to“production fluctuations” which sent blended average selling prices falling. This impact is expected to extend into the second quarter, they added.
For the current quarter, the chipmaker forecasted revenue to fall 4% to 6% sequentially. Gross margin is also expected to fall within the range of 18% to 20%, compared to 22.5% in the first quarter.
Still, the first quarter saw SMIC’s wafer shipments increase by 15% from the previous quarter and by about 28% year-on-year.
In the earnings call, SMIC attributed that growth to customer shipment pull in, brought by changes in geopolitics and increased demand driven by government policies such as domestic trade-in programs and consumption subsidies.
In another positive sign for the company, its first-quarter capacity utilization— the percentage of total available manufacturing capacity that is being used at any given time— reached 89.6%, up 4.1% quarter on quarter.
“SMIC’s nearly 90% utilization rate reflects strong domestic demand for semiconductors, likely driven by smartphone and consumer electronics production,” said Ray Wang, a Washington-based semiconductor and technology analyst, adding that the demand was also reflected in the company’s strong quarterly revenue growth.
Meanwhile, the company said in the earnings call that it is “currently in an important period of capacity construction, roll out, and continuously increasing market share.”
However, SMIC’s first-quarter research and development spending decreased to $148.9 million, down from $217 million in the previous quarter.
Amid increased demand, it will be crucial for SMIC to continue ramping up their capacity, Simon Chen, principal analyst of semiconductor manufacturing at Informa Tech told CNBC.
SMIC generates most of its revenue from older-generation semiconductors, often referred to as “mature-node” or “legacy” chips, which are commonly found in consumer electronics and industrial equipment.
The state-backed chipmaker is critical to Beijing’s ambitions to build a self-sufficient semiconductor supply chain, with the government pumping billions into such efforts. Over 84% of its first-quarter revenue was derived from customers in China.
“The localization transformation of the supply chain has been strengthened, and more manufacturing demand has shifted back domestically,” a representative said Friday.
However, chip analysts say the chipmaker’s ability to increase capacity in advance chips — used in applications that demand higher levels of computing performance and efficiency at higher yields — is limited.
This is due to U.S.-led export controls, which prevent it from accessing some of the world’s most advanced chip-making equipment from the Netherlands-based ASML.
Nevertheless, the chipmaker appears to be making some breakthroughs. Advanced chips manufactured by SMIC have reportedly appeared in various Huawei products, notably in the Mate 60 Pro smartphone and some AI processors.
In the earnings call, the company also said it would closely monitor the potential impacts of the U.S.-China trade war on its demand, noting a lack of visibility for the second half of the year.
Phelix Lee, an equity analyst for Morningstar focused on semiconductors, told CNBC that the impacts of U.S. tariffs on SMIC are limited due to most of its revenue coming from Chinese customers.
While U.S. customers make up about 8-15% of revenue on a quarterly basis, the chips usually remain and are consumed in Chinese products and end users, he said.
“There could be some disruption to chemical, gas, and equipment supply; but the firm is working on alternatives in China and other non-U.S. regions,” he added.
SMIC’s Hong Kong-listed shares have gained over 32.23% year-to-date.
Close-up of a hand holding a cellphone displaying the Amazon Pharmacy system, Lafayette, California, September 15, 2021.
Smith Collection | Gado | Getty Images
Amazon is expanding its online pharmacy to fill prescription pet medications, the company announced Thursday.
The company said it has added “hundreds of commonly prescribed pet medications” to its U.S. site, ranging from flea and tick solutions to treatments for chronic conditions.
Prescriptions are purchased via Amazon’s storefront and must be approved by a veterinarian. Online pet pharmacy Vetsource will oversee the dispensing and delivery of medications, said Amazon, adding that items are typically delivered within two to six days.
Amazon launched its digital drugstore in 2020 with the added perk of discounts and free delivery for Prime members. The company has been working to speed up prescription shipments over the past year, bringing same-day delivery to a handful of U.S. cities. Last October, Amazon set a goal to make speedy medicine delivery available in nearly half of the U.S. in 2025.
The new pet medication offerings puts Amazon into more direct competition with online pet pharmacy Chewy, as well as Walmart, which offers pet prescription delivery.
Amazon Pharmacy is part of the company’s growing stable of healthcare offerings, which also includes One Medical, the primary care provider it acquired for roughly $3.9 billion in July 2022. Amazon’s online pharmacy was born out of the company’s 2018 acquisition of online pharmacy PillPack.
Coinbase agreed to acquire Dubai-based Deribit, a major crypto derivatives exchange, for $2.9 billion, the largest deal in the crypto industry to date.
The company said Thursday that the cost comprises $700 million in cash and 11 million shares of Coinbase class A common stock. The transaction is expected to close by the end of the year.
Shares of Coinbase rose nearly 6%.
The acquisition positions Coinbase as an international leader in crypto derivatives by open interest and options volume, Greg Tusar, vice president of institutional product, said in a blog post – which could allow it take on big players like Binance. Coinbase operates the largest marketplace for buying and selling cryptocurrencies within the U.S., but has a smaller share of the global crypto market, where activity largely takes place on Binance.
Deribit facilitated more than $1 trillion in trading volume last year and has about $30 billion of current open interest on the platform.
“We’re excited to join forces with Coinbase to power a new era in global crypto derivatives,” Deribit CEO Luuk Strijers said in a statement. “As the leading crypto options platform, we’ve built a strong, profitable business, and this acquisition will accelerate the foundation we laid while providing traders with even more opportunities across spot, futures, perpetuals, and options – all under one trusted brand. Together with Coinbase, we’re set to shape the future of the global crypto derivatives market.”
Tusar also noted that Deribit has a “consistent track record” of generating positive adjusted EBITDA the company believes will grow as a combined entity.
“One of the things we liked most about this deal is that it’s not just a game changer for our international expansion plans — it immediately diversifies our revenue and enhances profitability,” Tusar told CNBC.
The deal comes at a time when the crypto industry is riding regulatory tailwinds from the first ever pro-crypto White House. Support of the industry has fueled crypto M&A activity in recent weeks. In March, crypto exchange Kraken agreed to acquire NinjaTrader for $1.5 billion, and last month Ripple agreed to buy prime broker Hidden Road.
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