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The Apple Siri AI icon is being displayed on a smartphone, with Apple Intelligence in the background. 

Jonathan Raa | Nurphoto | Getty Images

Apple’s big artificial intelligence push faces some big challenges in China — one of the iPhone maker’s most critical markets — as Beijing maintains strict rules around the buzzy technology.

The uncertain path in China comes at a time when Apple’s market share is being eroded in the world’s second largest economy by a resurgent Huawei and other local smartphones players, which are talking up their AI features.

Apple Intelligence is the Cupertino giant’s play that aims to bring AI across its devices. It features an improved version of Apple’s voice assistant Siri, as well as features that automatically organize your email or transcribe and summarize audio footage.

Apple said that Apple Intelligence will roll out in U.S. English this fall, with additional languages, features and platforms due to arrive over the course of next year. The company was, however, quiet on the product offering in China during the AI launch at its annual developers conference this month.

That’s likely to do with China’s stringent rules on AI, analysts told CNBC, as Apple tries to figure out how to approach the complex market.

“China is in another world when it comes to AI given the regulatory environment there, so China is a big asterisk on Apple’s big announcements last week,” Bryan Ma, vice president of devices research at IDC, told CNBC via email.

Beijing has enacted various regulations over the past few years focused on areas ranging from data protection to large language models — the massive sets of data that underpin applications like ChatGPT.

China’s AI market is heavily regulated. Some of the rules include requirements for LLM providers to get approval for the commercial use of their models. Generative AI providers are also responsible for taking down “illegal” content.

Apple’s China AI challenges

Navigating these rules will be tricky for Apple.

Firstly, some of the features of Apple Intelligence are based on Apple’s own language model, which runs on both the phone and on the company’s own servers.

Under Chinese rules, Apple would likely need to get its AI model approved by authorities.

Secondly, one of the biggest announcements this month was that Apple’s voice assistant Siri can tap into OpenAI’s ChatGPT for certain requests — but ChatGPT is banned in China, meaning Apple would have to find an equivalent domestic partner.

Baidu and Alibaba are among China’s technology giants that have their own LLMs and voice assistants, ranking them as companies with which Apple can potentially partner.

Meanwhile, China’s internet is heavily censored with regulators concerned about the potential for AI services to generate content, which may go against Beijing’s views or ideology.

The likelihood is that Apple will have to build an on-device AI model and a cloud-based AI model that complies with local regulations, Canalys analyst Nicole Peng told CNBC over email.

The other part of the equation on AI for Apple to be successful in China, according to CCS Insight Chief Analyst Ben Wood, is for the company to create a localized AI experience on its devices that appeals to Chinese users.

“Localising the Apple Intelligence experience will be a major challenge for Apple,” Wood told CNBC. “As with all technology deployments, there are nuances to the way the service is delivered to respect the specific customs, regulations and use cases in a particular country.”

Privacy

A key part of Apple’s pitch during the AI launch was its focus on privacy. The company announced Private Cloud Compute, whereby AI is processed on servers owned by Apple. Apple said that data processed is not stored.

Whether the tech titan will be able to fully own its own servers is another question. Chinese iCloud data is stored inside servers located in China which are run by a third party.

This could mean Apple might require a similar partnership for its AI computing servers, opening the tech giant up to critcisms about how private the data actually is.

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“Maintaining complete user privacy in an AI era in heavily regulated markets such as China will be the biggest test for Apple yet,” Neil Shah, partner at Counterpoint Research, told CNBC. “Its going to be challenging for Apple to have fully controlled own private compute servers in China.”

CCS Insights’ Wood said Apple’s focus on privacy could help introduce AI features to the market. China passed a major data protection law in 2021, which looks to limit how information is collected and stored.

“Apple’s on-going focus on privacy and security practices may help placate local regulators and Apple has not been afraid to make concessions when required,” Wood said.

Apple’s path to AI in China

CNBC has contacted Apple over Private Cloud Compute and the company’s AI ambitions in China. A spokesperson did not directly address those questions, but pointed CNBC to an interview in the Fast Company business magazine with Craig Federighi, Apple’s senior vice president of software engineering.

Federighi expressed the desire to bring Apple Intelligence to China.

“We certainly want to find a way to bring all of our best product capabilities to all of our customers,” he said in the Fast Company interview, adding that “in some regions of the world, there are regulations that need to be worked through.”

The Apple executive said the process was under way to introduce the AI products to China, but gave no timeline.

Smartphone makers globally are talking up their AI features as a way to sell high-end phones to consumers who want to hold onto their device for longer.

Apple has been facing a number of challenges in China, where its market share fell to 15% in the first quarter of 2024, versus 20% in the same period the year before, according to Canalys data. Huawei, whose smartphone business was crippled by U.S. sanctions, revived once more and is now the biggest smartphone player in China, where it competes with Apple with phones targeting the premium segment.

Apple’s lag behind domestic rivals in launching AI features in China is unlikely to be detrimental to iPhone sales.

“For Apple, deploying China-grade Apple Intelligence is going to be a marathon and not a sprint. It will be deployed in phases over the years until Apple is confident and until then it will have to face some competition,” Counterpoint Research’s Shah said.

Wood said Apple’s control of its hardware and software integration will allow it to deliver a different experience from that of its rivals.

“Apple has an uncanny ability to explain its services and features better than rivals, even if it is essentially delivering the same experience or a subset of what rivals can offer,” Wood said.

“Despite the current focus on AI by rival China-based smartphone makers, Apple should still be in a strong position.”

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How TikTok’s rise sparked a short-form video race

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How TikTok’s rise sparked a short-form video race

TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.

Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.

TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.

“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”

Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.

“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.

But there may a dark side to this growth.

As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.

“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”

Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.

“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”

Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.

While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.

Watch the video to understand how TikTok’s rise sparked a short form video race.

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Elon Musk’s xAI Holdings in talks to raise $20 billion, Bloomberg News reports

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Elon Musk's xAI Holdings in talks to raise  billion, Bloomberg News reports

The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)

Nurphoto | Nurphoto | Getty Images

Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.

The funding would value the company at over $120 billion, according to the report.

Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.

The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.

Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.

Faber Report: Elon Musk held call with current xAI investors, sources say

The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.

“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”

Read the full Bloomberg story here.

— CNBC’s Samantha Subin contributed to this report.

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Alphabet jumps 3% as search, advertising units show resilient growth

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Alphabet jumps 3% as search, advertising units show resilient growth

Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.

David Paul Morris | Bloomberg | Getty Images

Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.

GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”

The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.

Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.

Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.

Read more CNBC tech news

Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.

During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.

Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.

Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.

Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.

“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.

WATCH: Gemini delivering well for Google, says Check Capital’s Chris Ballard

Gemini delivering well for Google, says Check Capital's Chris Ballard

CNBC’s Jennifer Elias contributed to this report.

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