Apple CEO Tim Cook (L); John Giannandrea (C), senior vice president of machine learning and AI strategy; and Craig Federighi (R), senior vice president of software engineering, speak during Apple’s annual Worldwide Developers Conference in Cupertino, California, on June 10, 2024.
Nic Coury | AFP | Getty Images
Apple fully embraced artificial intelligence on Monday, as company executives explained the features and reasoning behind Apple Intelligence, the company’s new AI software suite.
But Apple’s Worldwide Developers Conference launch event was carefully crafted to distinguish the iPhone maker from current AI leaders, such as Microsoft and Google, at a panel discussion Monday afternoon.
Software chief Craig Federighi and AI chief John Giannandrea said during the panel that Apple has a different approach to the technology than its Silicon Valley rivals. Unlike companies that are building AI for a broad range of products, Apple is instead focused only on the devices it sells and the personal data that AI could use.
Apple revealed a more limited approach that eschews future-focused thinking about the potential of the technology in favor of small tasks that can be done now without burning up battery life.
“We think AI’s role is not to replace our users but to empower them,” Federighi said.
Apple’s AI may be the first that its over 2 billion users interact with. If its AI features are favored over cloud-based competition from Microsoft or Google, it could change how billions of dollars in AI infrastructure per year is built and shift the direction of products that use the technology.
Much of the AI development that has captured investor and technological interest has focused on building or securing powerful supercomputers equipped with Nvidia chips to develop even more power-hungry AI models. In this scenario, users access the AI software by communicating with equally powerful servers over the web.
Apple’s AI is mostly on your device
Apple Intelligence was unveiled during Apple’s Worldwide Developers Conference in Cupertino, California, on June 10, 2024.
Source: Apple Inc.
Apple’s vision for AI isn’t about one big model — it’s a slew of smaller models that don’t require the same amount of computing power and memory, running on Apple’s devices and chips themselves. If the AI on the phone can’t do it, then Apple, or an app using Apple’s tools, reaches out to the cloud to access a larger AI model. Apple partnered with OpenAI, for example, to give users access to ChatGPT if Siri can’t provide an answer. These features come into play only if users allow it.
Apple executives don’t refer to this strategy as using one or multiple models. Instead, they package it as just “Apple Intelligence.”
“We think that the right approach to this is to have a series of different models and different sizes for different use cases,” Giannandrea said.
Giannandrea said the company worked to create a 3-billion parameter model as part of Apple Intelligence. ChatGPT’s GPT-3 model from 2020, in comparison, is much larger, at 175 billion parameters. The more parameters, the more memory and computing power needed to run the model.
Apple’s approach is faster than the cloud-based options and has privacy benefits. However, there can be issues when the models are too small to get anything done. Apple is betting that through a user’s iPhone, its AI can tap into personal data about appointments, location, and what the user is doing. One example provided by Federighi is that his phone knows who his daughter is.
Apple also says it’s making sure its small models work only on tasks they can excel at, rather than give users an open-ended chatbot interface.
“There’s a critical extra step, which is we’re not taking this teenager and telling him to go fly an airplane,” Federighi said.
Many AI features Apple announced on Monday are similar to products already announced this year. Apple’s AI can summarize and rewrite documents, generate small images, and translate conversations in real time. One notable feature will enable users to generate new emojis using AI without connecting to the internet. The new features will be released this fall in a beta version.
Apple’s approach to privacy
Private Cloud Compute unveiled during Apple’s Worldwide Developers Conference in Cupertino, California, on June 10, 2024.
Source: Apple Inc.
Privacy will be a challenge for Apple as it embraces AI. It has used privacy as one of its primary marketing tools for years, highlighting that Apple’s business model doesn’t require ad targeting and that it has the best interests of its users in mind versus data brokers and spammers.
Other AI companies collect user data and store it to improve their software, a practice that doesn’t fit Apple’s current privacy policies. Much of Apple’s presentation on Monday pointed to steps the company has taken to prevent the impression that it’s hoovering up user data to improve its AI.
“We’re not going to take that data and go send it to some cloud somewhere,” Giannandrea said. “Because we want everything to be very private, whether it’s running locally or on a cloud computing service, and that’s the way we want it so we can use your most personal data.”
Apple didn’t detail what data was used to train its AI models, beyond that it uses files scraped from the public web in addition to licensed data, such as news archives and stock photography.
Apple said it developed its own servers using its Apple chips, called Apple Private Cloud, to prevent user data sent back to an AI server from being stored or re-used. It will allow third parties to inspect the software, a notable move for a secrecy-focused company that usually doesn’t provide information about its infrastructure.
“Even if a company maybe makes a promise and says, ‘Well, hey, look, we’re not going to do anything with the data.’ You have no way to verify that,” Federighi said, explaining why Apple will allow inspection of its AI server software.
More AI to come
ChatGPT integration with Apple iOS 18 announced during Apple’s Worldwide Developers Conference in Cupertino, California, on June 10, 2024.
Source: Apple Inc.
At times, Apple officials seemed to downplay how big a shift this is in the company’s AI strategy, saying that it’s a continuation of the machine learning work the company has already done to edit photos or transcribe text, or to put AI-specific blocks on its chips.
“It’s only recently that others are starting to suddenly claim like there’s some new category there,” Federighi said. “But those are things we’ve been shipping for a long time.”
However, Apple didn’t bet it all on a single approach. It will offer ChatGPT built into its operating systems, allowing users to prompt OpenAI’s model for free and offering users a more powerful and larger AI model. However, OpenAI’s ChatGPT will be marked in Apple’s software, telling users that data will be sent to OpenAI servers, which run on Microsoft’s cloud. Answers will indicate that they were generated by ChatGPT, too, just in case they go off the rails.
Apple said it could offer different models in the future, signaling that Apple Intelligence is not the only AI system it expects its customers to use. Federighi said that one day some of its customers might want a medical AI system or legal AI model built into Apple products, for example. Or maybe one of Google’s models.
“We’re going to look forward to doing integrations with models like Google Gemini, for instance, in the future. I mean, nothing to announce right now,” Federighi said. “But that’s our direction.”
China’s artificial intelligencedevice market is already booming, and in the advanced technology race against the U.S., the country’s expertise in hardware could give it an edge.
“The advantage comes from the fundamental root that China is a nation of manufacturing,” Dr. Kai-Fu Lee, CEO of 01.AI and chairman of Sinovation Ventures, told CNBC. “Today, the competition is on the software, the models, the agents, the applications. But soon it will move to devices.”
Meta has sold millions of its smart glasses since introducing the specs in 2023, and the Chinese have caught on, with more than 70 Chinese companies creating competing products in the space.
Eyewear from companies such as Inmo and Rokid are sold worldwide. Xiaomi and Alibaba‘s are found only in China and are embedded with the tech giants’ own AI.
Alibaba’s DingTalk, a messaging platform for the workplace, this year released a credit card-sized AI gizmo meant for note-taking on the job.
The DingTalk A1 can record, transcribe, summarize and analyze speech from as far as 8 meters (26 feet) away, about the length of a large boardroom.
The device is similar to the Plaud Note, which is available in the U.S.
The device experimentation in China spans from the practical to the unconventional.
Chinese startup Le Le Gaoshang Education Technology released a “Native Language Star” brand translating gadget aimed at Chinese parents with limited English to teach English to their own children.
Read more CNBC tech news
The contraption, which is looped around the back of a user’s neck like a travel neck pillow and comes down toward the chest, has a sort of muzzle unit that goes over the mouth and mutes the user’s own voice.
The unit is embedded with Tencent and iFlyTek AI and is billed as a way to turn an English-speaking Chinese parent into a “laowai,” or foreigner. It retails for $420.
Having so many hardware touchpoints helps with adoption and with getting people used to the technology. It’s also a boost for companies to gather a war chest of data compared to other countries, analysts say.
“When you still hear people outside of China talking about what the future of the AI device might be, the market is full of AI devices here already,” tech consultant Tom van Dillen of Greenkern said at his office in Beijing. “This creates this feedback loop again to make the AI even better.”
Yet an edge in hardware is far from a guarantee to win the AI race, especially if China’s AI lacks appeal with global customers due to privacy or other issues, or if it falls well behind its counterparts in the U.S. or elsewhere.
“You really have to be that Apple iPhone to reap the most of the reward,” Lee cautioned, referencing late entrepreneur Steve Jobs’ invention that is often seen as one of the most transformative consumer products ever. “I think the China advantage for building the Apple iPhone for the AI age is that the capabilities are there — engineers and entrepreneurs, and so on. But it will still be a race.”
President Donald Trump on Monday said Nvidia will be allowed to ship its H200 artificial intelligence chips to “approved customers” in China and elsewhere, on the condition that the U.S. gets a 25% cut.
The policy “will support American Jobs, strengthen U.S. Manufacturing, and benefit American Taxpayers,” Trump wrote.
“The Department of Commerce is finalizing the details, and the same approach will apply to AMD, Intel, and other GREAT American Companies,” he added in the post.
The H200 is a higher-grade chip than the H20, but not the company’s top-of-the-line product.
Nvidia shares climbed earlier Monday on news that the Commerce Department was set to approve the China sales, but later pared those gains. The stock rose about 2% after hours.
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Nvidia (NVDA) and Advanced Micro Devices (AMD) stock prices
“We applaud President Trump’s decision to allow America’s chip industry to compete to support high paying jobs and manufacturing in America,” a spokesman from Nvidia told CNBC in a statement.
“Offering H200 to approved commercial customers, vetted by the Department of Commerce, strikes a thoughtful balance that is great for America,” the spokesman said.
Semiconductors, which are key components in nearly every category of electronics, are at the center of the AI race between the U.S. and China.
They have also played a role in the tumultuous trade relationship between the two economic superpowers.
Read more CNBC tech news
When Beijing imposed export controls on rare-earth minerals, which are used in the production of some high-end chips, the Trump administration threatened to massively increase tariffs on U.S. imports from China.
After meeting in South Korea in late October, Trump and Xi struck a tentative trade truce in which China committed to end “retaliation” against U.S. chipmakers, according to the White House.
Trump said after that meeting that he discussed the export of Nvidia chips with Xi.
Broadcom shares hit an all-time high during Monday’s trading session after the emergence of another encouraging sign that the company’s custom chips are all the rage on the AI scene. The newest development comes from the tech website, The Information, which said Microsoft could be looking to move its custom chip business from Marvell Technology to Broadcom. The report is the latest in a string of recent good news for Broadcom, which delivers quarterly earnings after Thursday’s close. Shares of Marvell were understandably falling more than 7%. Also weighing on Marvell stock was a note from Benchmark, in which the analysts call out with a “high degree of conviction” that Amazon may also be looking to move the development of future generations of its Trainium chips away from Marvell to AIchip, a Taiwanese designer. Taken together, Broadcom shareholders should feel good about the company’s standing in the custom AI market, as specialized silicon emerges as a competitor to Nvidia’s all-purpose AI chips, which have been the gold standard in running artificial intelligence workloads. At the same time, the weakening position of Marvell amplifies Broadcom as the go-to company for custom chips. The Information report, as it relates to Microsoft, comes after the success of Google’s tensor processing units, which were co-developed by Broadcom. The TPUs have been praised in recent weeks following the release of Gemini 3, the latest large language model from Alphabet ‘s Google. Gemini 3, which has leapt to the top of the app leaderboards, was trained and runs entirely on Google’s custom TPUs. A couple of weeks ago, The Information reported that Meta Platforms was thinking about using Google’s TPUs for its data centers in 2027. AVGO YTD mountain Broadcom YTD While it’s great to watch Broadcom’s share price climb, we don’t love it when a stock runs into an earnings release, as it indicates high expectations. We do understand the move, though, because all this news has made it clear that Broadcom’s custom silicon business is primed for further gains. We don’t expect to hear much about these latest two developments on the post-earnings call. We do, however, suspect that talk about custom chip demand will center around the interest Broadcom has been seeing following the launch of Gemini 3. Outside of custom chips, there will be high interest in Broadcom’s networking business, which has seen incredible growth over the past year, given the increased need for high-bandwidth networking solutions resulting from the explosion of AI adoption — especially with the introduction of reasoning models and agentic solutions. On the legacy front, we expect to see some gradual improvement, thanks in part to seasonality as the company’s wireless revenues are tightly linked with the iPhone sales cycle, given that Apple is the company’s primary wireless customer. As for software, we continue to expect strong growth and margin performance driven by VMware, and we will be interested to hear about any additional synergy and cross-selling opportunities the team has been working on. (Jim Cramer’s Charitable Trust is long AVGO, MSFT, AMZN, META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.