Apple offering a peek at AI’s financial reality
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, Sept 11 (Reuters Breakingviews) -It’s unclear yet if the AI boom is simply a solution in search of a problem. Apple AAPL.O may provide an early answer. Its iPhone 16, optimized for a range of machine-learning features, is due to hit stores next week. Sales figures should hint at whether consumers are willing to pay for the costly and hyped technology and if there’s a sustainable business model for it.
AI is everywhere, at least in terms of investment. Nvidia NVDA.O, Amazon.com AMZN.O, Microsoft MSFT.O, Alphabet GOOGL.O and Meta Platforms META.O alone have added a combined $5 trillion of market capitalization since ChatGPT, with its responses to human-language queries, was released less than two years ago. Oracle ORCL.N founder Larry Ellison said on Monday, the same day Apple unveiled its new handset, that this latest battle for technical supremacy will probably last a decade. His company is designing a data center that already has permits for three small nuclear reactors, as many as the United States has built in 25 years.
Although some of the mania has receded, Apple has the power to reignite it. The $3.4 trillion company is touting its new phone’s ability to help create videos, summarize text and speech, and conduct visual searches. It’s similar to what rivals offer, but Apple has a well-earned reputation for producing secure and user-friendly gadgets.
Only the new model, and some versions of the last one, will support the new features. In the past, notable improvements have powered iPhone sales. In 2015, for example, the iPhone 6, with its bigger screen, helped push revenue up 50%, to $155 billion, from the previous year. Similarly, in 2011, the iPhone 4’s front-facing camera and accessibility on more wireless networks sparked a nearly 90% annual increase.
The smartphone market is mature now and most new developments have become incremental. As a result, customers tend to buy a new handset when they need to replace an old, broken or lost one. It helps explain why analysts are only forecasting a 7.5% rise in iPhone revenue over the next fiscal year, according to LSEG. It won’t be clearcut, but a more significant jump would probably signal vibrant interest in AI.
Disappointing sales also won’t necessarily sound a death knell for machine learning. Google and others have plenty of freely available services that may suffice for now. It also could take years for engineers to figure out what the killer-app is. Apple will nevertheless offer one of the first peeks into AI’s financial reality.
Follow @rob_cyran on X
CONTEXT NEWS
Apple on Sept. 9 unveiled its iPhone 16, which will be able to run the company’s artificial intelligence developments. The devices will be available in stores starting on Sept. 20.
The Apple Intelligence features include an updated version of Siri, its voice-activated digital assistant, along with new writing tools, automated summaries of text and speech and visual search features. The company will roll out parts of Apple Intelligence in October and other features later in the year.
Graphic: Apple's new iPhone may emit an AI signal https://reut.rs/4gjSlrM
Editing by Jeffrey Goldfarb and Sharon Lam
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