Analysts debate whether Apple's measured AI approach will pay off

As artificial intelligence continues to reshape the global technology industry, the restrained approach by one of the world's most prominent tech companies to AI investment is prompting debate among analysts, with some questioning whether it is falling behind while others argue its strategy could prove more sustainable over the long term.

While governments and technology companies are investing heavily in AI infrastructure, Apple has largely avoided the multibillion-dollar spending on data centres that has become commonplace among many of its Big Tech rivals, as highlighted in a CNN analytical piece.

The company manufactures the smartphones, tablets and computers that billions of people use to access AI-powered services, yet it has faced growing criticism that it is lagging behind competitors in developing its own artificial intelligence capabilities.

By contrast, Nvidia has emerged as one of the biggest beneficiaries of the AI boom. The chipmaker supplies the processors and software tools that underpin much of the world's AI infrastructure, making it central to the technology's rapid expansion.

Investor enthusiasm has propelled Nvidia to new milestones, with the company becoming the first to reach a market capitalisation of $5 trillion in October, only months after surpassing $4 trillion in July.

The contrasting fortunes of the two companies have reignited debate over which business model is better positioned for the next phase of AI development.

Joe Tigay, portfolio manager at the Rational Equity Armor Fund, said the answer depends on the maturity of the technology.

"When we’re in the part where we’re creating (AI)… that’s where you’re going to be watching Nvidia," he said.

Looking further ahead, however, he argued that companies enabling consumers to use AI services could become more valuable.

"In the future, we’re going to be looking for companies that are going to monetize the consumption of AI. And Apple absolutely wants to be that company."

Apple bets on stability

Unlike many of its competitors, Apple has continued to focus on its core hardware business rather than significantly expanding AI infrastructure.

The company's financial performance has reinforced investor confidence in that strategy. Revenue from iPhone sales increased 22% in the latest quarter compared with the same period a year earlier, while overall revenue rose 16%, exceeding Wall Street expectations.

Nevertheless, analysts continue to question how Apple plans to adapt its products to the AI era, particularly after delays affecting several artificial intelligence initiatives, including the company's upgraded Siri assistant, which is expected to launch later this year.

Bloomberg Intelligence analyst Anurag Rana argued that Apple's strategy may ultimately prove less risky than the heavy spending undertaken by its rivals.

“The reason why Apple has done so well is people finally recognize that they don’t need to spend hundreds of billions to be relevant in this market,” Rana said, “because they will use whichever best (AI) model that’s out there, and that model company would be privileged to be on the iPhone.”

AI pushing prices up

Even without aggressively expanding its own AI infrastructure, Apple is feeling the effects of the industry's rapid growth.

The surge in demand for AI data centres has contributed to shortages of memory components, increasing manufacturing costs across the technology sector.

Apple has already raised prices for several products, including Mac computers and iPads, and some analysts believe iPhone prices could also increase if component costs continue to rise.

The company has also introduced a new leasing programme allowing customers to subscribe to iPhones, iPads, Apple Watches and Mac computers rather than purchasing them outright, a move aimed at making its devices more affordable despite higher prices.

Apple has warned investors that memory costs are expected to rise further during the September quarter.

Following the release of its latest earnings report, the company's shares fell by more than 6% in after-hours trading, reflecting investor concerns over rising costs and Apple's position in the rapidly evolving AI landscape.

By Nazrin Sadigova