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The Rising Tide of Apple’s AI Strategy: A Potential 6% Revenue Surge on the Horizon Amidst Near-Term Challenges

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Apple, Inc. (AAPL) might be steering a new course with its AI development, as murmurs of the tech giant launching its AI model and exploring licensing with Google and OpenAI come to light. This shift in strategy, as opined by Gene Munster, Managing Partner at Deepwater Asset Management, follows the shelving of Project Titan and could potentially unlock a treasure trove of opportunities for the company.


A Rare Departure: Munster points out that Apple’s decision to consider licensing another company’s tech stack, post the abatement of the car project, marks a significant divergence from its usual playbook.


By scrapping the car initiative, Apple stands to liberate a substantial $4 billion to $5 billion annually, approximately 11% of its total R&D expenses, paving the way for a more concentrated investment in artificial general intelligence (AGI).


Faced with the urgency to integrate generative AI swiftly, Apple is exploring all avenues. Munster foresees the company rolling out its own model to power selected features across its product spectrum while also mulling over licensing a model to bolster other functionalities.


Should Cupertino delve into model licensing, Munster speculates that the financial commitment could soar to several billion dollars annually. The cost structure, he suggests, might mirror Apple’s search deal with Google – either usage-based or featuring a flat guarantee.


The expenses for Apple hinged on usage intensity, with Munster positing that if the model underpins the majority of AI functionalities on the iPhone, the costs could surge, whereas limited use scenarios might incur reduced expenses. Given its vast user base, Munster envisions Apple opting for the former.




See Also:Everything You Need To Know About Apple Stock


Apple’s Leading Edge: Despite the intricate landscape of user data rights, Munster remains steadfast in his belief that Apple will stay at the vanguard of personalized AI. He posits that Apple will uncover paths to earn user confidence for personalized AI opt-ins.


Introducing an AI subscription model, Apple might capture revenue by levying around $10 monthly for personalized AI access. Even with a conservative user uptake rate, Munster anticipates a substantial contributory effect on Apple’s top line.


β€œApple comprehends the urgency. AGI holds transformative potential for them, necessitating the integration of AI into the bedrock of the company’s competencies – hardware, software, and services,” he commented. Munster concedes that this shift might demand marginal sacrifices in the immediate term for enlarged margins in the longer run.


Anticipating a gradual ebbing of net income in the upcoming years, commencing in the latter half of this year, Munster predicts a 130 basis-point decline in margins to 24% compared to fiscal 2023.


Apple futures climbed 0.22% to $174.10 in early morning trading on Tuesday, per Benzinga Pro data.


Read Next: β€˜Clock Is Ticking’ For Apple As It Faces Obliteration In Auto Market, Says Gurman: Here’s How Cupertino Can Turn CarPlay Into A Moneymaker



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