Google (GOOGL) is a primary beneficiary of Apple's AI weakness, securing a multi-billion dollar deal to power the new Siri with its Gemini model. Investors in Apple (AAPL) should watch for the launch of a premium foldable iPhone this fall and a new touch screen MacBook Pro by year-end as key revenue drivers. However, Apple's significant lag in AI and new dependency on competitor Google presents a major long-term risk to its ecosystem. The analysis suggests Meta's (META) ambitions in the smart glasses market face a significant threat, as Apple is expected to dominate this category upon entry. Finally, keep an eye on private AI companies like Anthropic and OpenAI as key players to watch for future IPOs or as disruptive hardware competitors.

Apple (AAPL)

• AI Strategy & Weakness:
  • The podcast guest, Mark Gurman, states that Apple is "so behind in AI" and has "completely screwed up AI in every which way."
  • The 2018 hiring of John Jean-Andrea from Google is described as the "biggest mistake" of Tim Cook's tenure, as it failed to advance Apple's AI capabilities.
  • Siri, once a breakthrough product, became "utter junk" and was lapped by Google Assistant and Alexa.
• Partnerships:
  • Apple is entering a long-term partnership with Google to use its Gemini model to power a new version of Siri and a new chatbot. This is described as a "breakthrough" for Apple, but also "embarrassing."
  • The chatbot will run on Google Cloud Platform and Google TPUs.
  • Apple was originally planning to rebuild Siri around Claude from Anthropic, but Anthropic's pricing was too high (several billion dollars a year with annual doubling).
  • In China, Apple will need to partner with local AI providers like Alibaba or Tencent for its AI features.
• Product Pipeline & Future:
  • New Siri: A new version of Siri is launching, but it's largely features that were announced two years ago. The real "good stuff," an Apple chatbot powered by Gemini, is expected in June.
  • Foldable iPhone: A foldable phone is expected to launch "in the fall" and will be a top-of-the-line device priced at at least $2,200. It is expected to do very well in China.
  • MacBook Pro: A new MacBook Pro with an OLED display, a thinner design, and a touch screen is expected by the end of the year. The guest mentions he "cannot wait to drop $4,000 on that thing."
  • Low-Cost MacBook: Apple is working on a low-cost MacBook powered by an iPhone chip that is positioned to "destroy PCs and Chromebooks."
  • Vision Pro: Described as an "over-engineered device." Its future is uncertain, and Apple has already canceled plans for a cheaper "Vision Air" model.
  • Smart Glasses: Apple is developing smart glasses and is expected to "destroy Meta" in this category due to its strong ecosystem integration, particularly with iMessage.
  • Robotics: The company is exploring a home robot that looks like a "Pixar lamp" with a floating display, but this product is "years away."
• Financials & Management:
  • Despite AI struggles, the financials are strong, with a potential $135 billion to $140 billion quarter expected.
  • John Ternus, the head of hardware, is positioned as the most likely successor to CEO Tim Cook.
  • Apple plans to increase the number of ads in the App Store and will introduce ads into Apple Maps this year.

Takeaways

• Short-Term Strength, Long-Term Risk: While Apple's upcoming earnings and hardware pipeline (foldable phone, new MacBooks) look strong, its significant lag in AI poses a major long-term risk to its ecosystem dominance.
• Dependency on Google: The partnership with Google is a crucial stopgap for Apple's AI weakness. It mitigates immediate risk but also highlights Apple's dependency on a key competitor.
• Hardware is Still King: Apple's primary strength remains its hardware innovation. Investors should watch the reception of the new foldable iPhone and touch screen MacBook Pro, as these will be key revenue drivers.
• China is a Headwind: The Chinese market is a significant challenge due to intense local competition and Apple's lack of bespoke products for the region. The success of the foldable phone in China will be a key indicator.

Google (GOOGL)

• Major Partnership Win: Google has secured a "breakthrough" deal to have its Gemini AI model power Apple's new Siri and chatbot features.
• Significant Revenue Stream: Apple will be paying Google "billions" for this long-term partnership, which involves using Google Cloud Platform and Google TPUs.
• AI Leadership Reinforced: Apple, a major competitor, poaching Google's AI chief years ago only to return to pay for Google's latest AI model validates Google's leadership in the field.
• Siri Integration: The new Siri will use Gemini for generative AI tasks, effectively putting Google's AI in the pockets of over a billion iPhone users.

Takeaways

• Bullish Catalyst: The partnership with Apple is a significant positive for Google, creating a new, multi-billion dollar revenue stream and cementing its status as a foundational AI provider.
• Monetizing AI: This deal is a prime example of how Google is successfully monetizing its massive investment in AI beyond its own products.
• Competitive Moat: By becoming the AI engine for its biggest mobile competitor, Google is widening its competitive moat and making its technology even more integral to the tech ecosystem.

OpenAI

• Direct Competitor to Apple: OpenAI is viewed as a "real firestorm for Apple" because it is developing competing hardware.
• Hardware Ambitions:
  • The company is working on AirPods competitors, internally codenamed "Sweet Pea," that will have ChatGPT built-in.
  • Famed Apple designer Jony Ive is leading the design for this new hardware.
• Partnership Unlikely: Apple is highly unlikely to partner with OpenAI because it views the company as a direct threat that is "trying to put you out of business."
• Skepticism on Hardware Success: The guest is skeptical that OpenAI's hardware will be a success, citing the "extremely high" barrier to entry for new hardware companies and doubting they could sell 45 million units. Apple could also quickly replicate the AI features using its Gemini partnership.

Takeaways

• Ecosystem Threat: OpenAI represents a new kind of threat to Apple. Instead of just competing on software, it is attacking Apple's lucrative hardware business (starting with AirPods).
• High-Risk, High-Reward Venture: OpenAI's move into hardware is a major risk. While the podcast is skeptical, a successful hardware launch designed by Jony Ive could disrupt the market. This makes OpenAI a key company to watch, even as a private entity.

Anthropic

• Almost an Apple Partner: Apple was seriously considering rebuilding Siri around Anthropic's Claude AI model.
• Aggressive Pricing: The deal fell through because Anthropic was "holding them over a barrel," demanding "several billion dollars a year" at a price that would double annually for three years.
• Internal Use at Apple: Despite the failed partnership, Apple is currently using custom versions of Claude to power internal tools and product development. The guest notes that Anthropic is a "big one to watch."

Takeaways

• Key AI Player: Anthropic's technology is considered high-quality enough that Apple was ready to bet the future of Siri on it. This validates its position as a top-tier AI model provider alongside OpenAI and Google.
• Future IPO Potential: As a private company being used by major tech players like Apple, Anthropic is a significant name to watch for a potential future IPO. Its ability to command high prices indicates strong demand for its technology.

Meta (META)

• Smart Glasses Competition: Meta has popularized the concept of smart glasses, but the guest believes Apple will "destroy Meta" in this category when it releases its own version.
• Ecosystem Disadvantage: The primary weakness for Meta's hardware, like the Ray-Ban smart glasses, is the lack of deep integration with core smartphone functions, especially iMessage for iPhone users. It's described as a "hard sell if you're an iMessage user."
• Llama Model: Apple has shown no interest in using Meta's open-source Llama AI model or partnering with the company.

Takeaways

• Significant Competitive Threat from Apple: Investors in Meta should be aware of the looming threat from Apple in the smart glasses space. Apple's ecosystem advantage could severely limit the growth of Meta's hardware ambitions.
• Product Has Potential, But Faces Hurdles: While the Meta Ray-Ban glasses are described as having "oozing with potential," their success is capped as long as they cannot overcome the integration hurdles with the dominant iPhone ecosystem.