Apple new CEO John Ternus faces defining challenge: Fixing AI strategy
John Ternus, senior vice president of hardware engineering at Apple Inc., talks about iMac computers at the Peek Performance virtual event on Tuesday, March 8, 2022, in New York, USA. Photographer: Gabby Jones/Bloomberg via Getty Images
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Apple Despite remaining largely on the sidelines of the AI boom, it has maintained its dominance in consumer devices and has built a market cap of $4 trillion. But investors won’t remain patient forever and will be looking to new CEO John Ternus for a clearer strategy when it comes to playing the hottest market on the planet.
Tim Cook’s 15-year tenure as Apple CEO will end on September 1, the company announced Monday. Ternus, Apple’s longtime hardware boss, takes over, becoming the second leader since Steve Jobs left In 2011, he was less than two months away from dying of cancer.
As Cook departs, Apple faces numerous challenges, including a complex supply chain complicated by geopolitical tensions and rising memory prices due to unprecedented demand from the AI fabric. But for Ternus, perhaps the most critical aspect of his new job will be pushing the company further into the artificial intelligence field, where it lags behind many of its megacap peers.
So far, Apple’s AI strategy has involved avoiding high capital expenditures. Microsoft, Google, Amazon And Meta We’re committing to hundreds of billions of dollars a year in capital expenditures to fund new data centers and fill them with expensive AI chips. When it comes to developing a basic AI model, Apple has also invested in this and is instead relying on Google’s Gemini to power its AI features; This includes a major Siri upgrade expected after a delay later this year.
In 2024, Apple introduced Apple Intelligence, which includes image generators, text rewriters, the ability to summarize push notifications, and integration with OpenAI’s ChatGPT. Consumer reaction has been mixed, but Apple continues to sell tons of iPhones, and users are just getting plenty of AI options on those devices from other companies.
ChatGPT and Anthropic’s Claude are the two most popular free iOS apps right now; Gemini is ranked fourth and Meta AI is ranked eighth. Meanwhile, Apple claims that heavy workloads will be running on a chip inside the phone within a few years, playing to its strengths as the company has been integrating AI-enabled silicon into its devices since 2017.
“By selecting John Ternus as hardware leader, Apple may be signaling that it still believes the future of AI will be driven by tightly integrated devices, not just software,” he said. Timothy HubbardAssistant professor of management at the University of Notre Dame.
For now, Apple is getting major growth from iPhone sales. In the latest quarter, iPhone revenue rose 23% year over year to $85.3 billion; This is a jump attributed to strong sales of the company’s iPhone 17 models released in September.
Cook said at the time that demand for iPhones was “simply staggering.” The company is scheduled to announce second-quarter financial results next week. Cook will remain CEO at this report, but investors will have many questions about Ternus and where he thinks Apple is heading.
AI-powered hardware seems to be where the market moves from wearables, robotics, spatial computing, or possibly some combination that Apple has yet to demonstrate. In January, Bloomberg reported that Apple is accelerating Development of three AI wearable devices that will all be built around Siri: smart glassesa necklace and AirPods with a camera.
Apple also plans to unveil a foldable phone, which Creative Strategies CEO Ben Bajarin called “the most important hardware moment in years.”
“I think the biggest question is what happens after the iPhone,” Bajarin told CNBC in March. “These are mature categories and we have no idea what will happen next, but we do know it will be some form of AI hardware.”
Artificial intelligence and services
Ternus, 50, will also face the challenge of pushing AI in services within Apple’s business, where Apple relies on iPhone users to pay for AppleCare, iCloud, Apple TV+ service subscriptions and use Apple Pay. Apple is taking share as consumers switch to paid versions of chatbots with ChatGPT, Claude, and other productive AI services.
Forrester analyst Dipanjan Chatterjee said “the seas will be turbulent for Apple in the coming years because there have been so many changes in the way consumers interact with technology, particularly generative AI.”
Ternus will also need to decide whether the company will continue to emphasize privacy or embrace AI-driven personalization. According to Cook, Apple’s privacy-first approach to user data has long been a differentiator compared to other tech giants like Meta and Google that specialize in letting brands target users with ads.
Deepwater Asset Management’s Gene Munster told CNBC’s “Closing Bell: Overtime” on Monday that his firm has recently bought more apple stocks because of its hopes for “personalized artificial intelligence.”
“Apple has an opportunity to tell investors a story that could be very convincing that they’re going to buy this,” Munster said.
nowhere on monday Press release Did Apple mention artificial intelligence when announcing the CEO change? Instead, the chapters on Ternus focused on his 25 years at the company and his pivotal role in “introducing numerous new product lines, including iPad and AirPods, as well as multiple product generations in the iPhone, Mac, and Apple Watch.”
But when the Ternus era begins in just over four months, it’s clear that AI will need to be front and center. Notre Dame’s Hubbard said Apple needs to return to its roots, at least when it comes to innovation.
“The strengths that have made Apple dominant; rapid innovation is where Apple started and maybe that’s where the company needs to return,” Hubbard said.
—CNBC’s Jonathan Vanian contributed to this report.
WRISTWATCH: We expect more hardware innovations from John Terrnus
