Former insiders on how the iPhone maker can win with AI
CUPERTINO, Calif. — Nasdaq, market opening festivities Apple’s The company’s expanded Silicon Valley headquarters opened Tuesday on the eve of its 50th birthday.
Tim Cook rang the opening bell from a table inside Apple Park, the ring-shaped campus that Steve Jobs spent his final years helping to design, ushering in the iPhone maker’s second half-century in the process.
It was a celebratory occasion, but it was reaching a pivotal point for an iconic American company that faces major challenges today and in the years to come as the tech industry is swept away by artificial intelligence.
Before the AI boom that began with the release of OpenAI’s ChatGPT in late 2022, Apple managed to win by dominating the consumer device market and adding the Siri voice assistant to its product portfolio.
The sales pitch has always been simple: Pay a premium for a device and trust that what goes on it stays yours, whether it’s messages, photos, or notes. Personal data is not fuel for an advertising engine.
Two of Apple’s megacap tech peers have taken the opposite approach. Google And Meta They are digital advertising giants that provide their basic services for free and make tens of billions of dollars of profit annually by targeting users with promotions.
Apple’s principle came from Jobs, its co-founder and long-time CEO. His successor, Cook, has been preaching this since he became CEO in 2011, shortly before Jobs’ death. This was good news in Cupertino for most of Apple’s 50-year history.
That’s why Apple’s latest move feels so out of character.
In January, Apple struck a multi-year deal to use Google’s Gemini AI as part of its relaunched Siri. Google currently pays around $20 billion a year to be the default search engine on the iPhone. In artificial intelligence, this relationship is reversed: Apple becomes the party paying for basic intelligence by licensing Google’s technology.
The real problem is not money; Apple recorded $54 billion in net cash in the latest quarter and returned $32 billion to shareholders, mostly through buybacks. The real concern, according to Asymco analyst Horace Dediu, is what the deal with Google means in terms of user data and whether the search company is using it to power its algorithms.
“This is where the wall should be,” said Dediu. “They are not giving this information to Google, and because Apple is sharing information with them, Google is not being smarter and improving its core business.” “As intelligence improves, it should stay within Apple,” he added.
Apple declined to identify anyone for this story, but CNBC spoke to former employees and people who have been investigating the business for decades. The general consensus is that Apple is at a crossroads, caught between the values that have shaped the company and technological change that is forcing it to compete on unfamiliar ground.
One reason Apple is in this dilemma is that the company has been slow on AI compared to its tech peers. The long-awaited AI update to Siri has faced delays, but Apple says it will arrive by the end of the year. In 2024, the company launched Apple Intelligence, which includes image generators, text rewriters, the ability to summarize push notifications, and integration with ChatGPT. Consumer reaction has been mixed.
Where Apple really bucked the trend was in keeping capital spending under control. Amazon, MicrosoftAlphabet and Meta are spending hundreds of billions of dollars a year on new AI infrastructure to support the latest models and workloads.
While competitors are building giant model businesses that involve training through the collection of information and data, Apple has acted clearly; It was a decision that many in the industry said left the company at a disadvantage when it came to productive AI.
Apple CEO Tim Cook holds an iPhone 17 pro and an iPhone air as Apple holds an event at the Steve Jobs Theater on its campus in Cupertino, California, on September 9, 2025.
Manuel Orbegozo | Reuters
‘Fork in the road’
Cook has been saying for years that privacy is a “fundamental human right.” One During an appearance on ABC’s “Good Morning America” in mid-March, he reiterated that Apple was doing as much work as possible on the device. When necessary, Apple uses what it calls Private Cloud Computing, which is essentially a secure extension of the device in the cloud.
Deepwater Asset Management’s Gene Munster says Apple’s leadership misread the market.
“This comes from not understanding where the world is going and how fast things are happening,” he said, leaving the company now at a “crossroads” when it comes to the long-term viability of its products.
The challenge is “to power an AI digital assistant,” Munster said. He warned that if Apple didn’t fix this, someone else would; This development could destroy Apple’s control over the future.
Siri should have given Apple an advantage. It began operating in October 2011, one day after Jobs’ death. It would be years before Amazon Alexa or Google Assistant would hit the market. But the product stopped.
Former Wall Street Journal columnist Walt Mossberg, who has long covered Apple, said Apple “has basically blown a five-year lead.”
Siri co-founder Dag Kittlaus left Apple after Jobs died and recently told CNBC: “I didn’t want to work without him.”
Kittlaus said Siri continues to improve technically, especially when it comes to speech recognition. But without Jobs’ instincts and product vision, the company never truly expanded Siri’s capabilities, he said.
“There are no longer technical barriers to any part of the Siri vision we’ve had since the old days,” Kittlaus said. “Back then, we would have killed to have the technology that exists now.”
Adam Cheyer, co-founder of Siri and Viv Labs
Photo courtesy of Adam Cheyer
Adam Cheyer, who created Siri with Kittlaus, said the original vision was much more ambitious than what was released. The idea was to create a system that could both answer questions and take action, eventually supporting a broader ecosystem that could be used by outside businesses, similar to the App Store. The challenge, he said, is to combine “knowing and doing” into one system.
The first company that can do this “with the right experience” will be the “dominant technology company of the next AI era,” Cheyer said. “And I think Apple can still play there.”
Today, AI is a cloud business. The models behind ChatGPT, Gemini, and Anthropic’s Claude are too large to run on a phone. But models are getting smaller. In a few years, heavy workloads will occur on the chip inside the phone.
This is Apple’s claim, and the company has been integrating AI-enabled silicon into its devices since 2017. Once artificial intelligence is on the device, the thought arises that Apple’s privacy problem begins to resolve itself. User queries are all processed locally and never touch a cloud server.
From mainframes to PCs to phones, it follows a historical model of computing moving from the center to the edge, says Dediu.
Tony Fadell, who founded Nest and produced the iPod and the first three iPhones before selling it to Google, said the first signs of change in computing were already visible. As more people experiment with personal AI agents, some are running the infrastructure themselves, often on devices at home such as Mac Minis.
Kittlaus said the Google partnership could be a bridge for Apple.
“People are motivated when they see the path to victory,” he said. “I guess that’s the moment.”
OpenAI challenge
As AI moves toward the edge, the question for Apple is whether the device it has spent the last two decades perfecting will remain at the center of computing.
Last year, OpenAI acquired Jony Ive’s design firm io. $6.4 billion and tasked the former Apple design chief with building something as important for the AI era as the iPhone was for the transition to mobile.
“This is an incredibly big ambition and an incredibly big vision,” John Sculley, Apple’s CEO from 1983 to 1993, said in an interview. “You can’t underestimate someone as brilliant as Jony Ive.”
Ive, who has designed the iPod, iPhone, iPad and Apple Watch, among other devices, is reportedly developing a family of screen-less devices for Sam Altman’s company.
Dediu said this is the scenario Apple should be worried about; It’s not a better device, it’s a simpler device that doesn’t need a screen. Apple’s advantage in visual design won’t matter if the AI interface turns out to be something people wear rather than hold.
It’s not an approach that has worked yet.
Ken Kocienda, who spent 15 years at Apple and invented the automatic keyboard correction feature for the original iPhone, left in 2017 and joined AI hardware startup Humane a few years later. Humane tried a screen-less, AI-based device, but the effort failed.
Kocienda said this idea may be true, although it is still very early. Fadell is less worried.
“These pins, pens, all these pendants; I think they’re all accessories for the phone,” he said. “You will see a federation of devices… and instead of removing devices from your life, they will all be AI-powered.”
If the future of AI hardware revolves around the phone, Apple could be poised to lead again with its next chapter shaped by the same strengths that founded the company.
This was the backdrop of Apple Park before dawn on Tuesday. The grass was still reflecting the night’s rain as the employees and Cook gathered on the lawn.
As Nasdaq’s opening anthem echoed through the garden, the skies opened and Cook stepped forward to ring the bell. The entire scene was almost impossibly controlled, as if even the weather was up to Apple’s choreography.
It all came together just in time to show off Wall Street, and the company is betting its Siri revamp will do the same.
The anniversary celebration capped off with a performance by Paul McCartney, another flamboyant performance in a production designed to project forward-looking confidence at a time when Wall Street is eagerly awaiting Apple’s AI comeback.
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