Can Apple buy its way to AI happiness?

Apple’s most senior leaders so far seem to have failed to find consensus on how to move forward with Apple Intelligence. They recognize the company appears to be lagging in the generative AI (genAI) race, but management appears split between those who want to build it in Cupertino, and those who hope to buy their way to industry leadership.

So far, neither side seems to have the room, with one thing holding everyone back being the insanely high valuations being thrown at AI companies at this point in the bubble. 

Why?

Look it this way – the question has to be, “Why spend billions when some of these companies will be worth a great deal less once the AI bubble bursts, as it inevitably will?” It’s a reasonable position, given that valuations at the current levels are not sustainable. And while governments everywhere want to sell themselves cheap to climb into figurative bed with the current crop of genAI billionaires, they face massive public resistance to adopting the dystopian result of their dollar-drenched trysts. Russia’s intrusive Max app seems ripe to inspire similar behaviors from other authoritarian governments.

Being different

The other issue is differentiation. Apple is a product company, and for all the blather about artificial intelligence, the only thing that matters is how the tech can become part of its product family. If you glance at the many existing machine intelligence features already in its products, you’ll see that most of these supplement existing hardware. When it comes to Apple Intelligence, for Apple the North Star must be the need to ensure it continues to offer something unique.

To some extent, doing this with AI is fundamentally difficult, as this kind of general purpose intelligence will eventually become a homogenous block of different models using similar data (all the data in the world) to inform responses to similar questions.

With that inevitable homogenization, AI services may yet become utilities rather than differentiated products. So, it could make sense for Apple to avoid developing its own general purpose AI, resolving to create specific solutions that work much more effectively for specific use cases and relying on partnerships with these emerging AI-as-a-Service companies (AI-ASS?). That seems to be the Apple Intelligence way. 

In that picture, how much difference would an AI acquisition make?

The problems of acquihire

The only way in which such acquisitions might make a difference is if the company were to both gain access to the models and the people who made those models. If that’s how the company is looking at it, then any acquisition talks must necessarily require some commitments around employment and long-term loyalty to Cupertino.

There’s no point doing an acquihire if everybody leaves, and this seems to be what’s been happening with the smaller AI purchases Apple has made. This may be an Apple-specific human resources problem, or a corporate culture problem, or it may reflect the insane competition for staff in the field.

What this all boils down to is that if Apple can’t find an acquisition target that includes an employee transfer of people genuinely committed to Apple, then — other than IP and/or any political advantage it might gain — it doesn’t have a deal. It would just have less money in the bank and still be unable to find the talent.

National security

It’s worth noting that at least one of the current rumored Apple acquisition targets (Mistral), is likely to be seen as a company of national strategic importance to France. Mistral is France’s best-known AI company, with partnerships across the government and leading tech industry players.

It’s unclear whether France, which, like the rest of Europe, is now struggling with data sovereignty, will see letting the AI service provider slip into the hands of US Big Tech fit the national narrative. What I’m saying is that as the national importance of AI is revealed, the number of potential acquisitions Apple can reasonably expect government approval for will decline.

Made in California

Can Apple invent its own AI to match the others on the market? The latest reporting suggests Craig Federighi, Apple senior vice president for software engineering still believes it is possible, with Services Senior Vice President Eddy Cue in the “Add to Shopping Basket” camp. And it is possible that much depends on what surprises Apple can bring to the table once it ships its own context-savvy Siri in a few months’ time. 

Earlier this month, Federighi told staff that his AI team has achieved more than was originally promised. “This has put us in a position to not just deliver what we announced, but to deliver a much bigger upgrade than we envisioned,” he said.

If the company surprises and delights its audience, perhaps Apple will give those teams a little more time to build Apple’s own genAI solutions. If not, then perhaps those acquisition discussions will intensify. I can’t be certain but it is easy to imagine we’ll get a glimpse of some of what the company has put together during the iPhone launch on Sept. 9.

Partnerships

Then there’s partnership possibility. The problem with partnerships is that teaming up gives people credibility, and to some extent gives the AI companies the upper hand. There are also unexpected challenges — Apple’s current AI partner, OpenAI, is reportedly building its own AI products with former Apple Chief Design Officer Jony Ive. We can’t know the extent to which that hardware threatens Apple’s interests. But it can’t have gone completely unnoticed that Apple is apparently about to introduce additional support for Google Gemini and other AI services as alternatives to the existing support Apple Intelligence has for ChatGPT.

While the most recent chapter in Apple’s never-ending journey toward AI seems based on the narrative that the company can somehow buy its way to success, the truth is that any acquisition would be complicated. And in the absence of a determined management consensus, even with the company checkbook ready, no one seems to be making a move.

All the same, as tides turn toward new iPhones, don’t be too surprised if something makes your awe drop.

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