Dispatch from WWDC: Apple AI News + Reaction

0:00Hey everyone, Alex Cantrowitz here. I'm currently coming to you solo from right outside the Steve Jabs Theater. I am sitting directly outside of it. It's a large circular building where all the action actually happens underground. And to my right is all the TV risers where CNBC and Bloomberg and others are set up. And I found this nice little quiet place where maybe some birds or some talking around me. But altogether, let's spend like 15 minutes together talking a little bit about what Apple announced today. ahead of our week of programming. We're going to talk about in more depth the event with M.G.

0:37Siegler of Spyglass. He's been on before. We love his analysis. Anyway, let's get right into it. So overall, the vibe today really was, well, that was it. And you could see that the stock market didn't seem to be overly enthused about Apple's big AI announcement, right? We're talking about an event that was probably, that was billed as maybe Apple's most important in a decade. And on the day, Apple closed down 1.91%. I also tweeted out a poll asking people for their reaction to the AI stuff that Apple had announced so far. This was basically towards the end of the presentation. 21.4 % said, wow.

1:2029.2 % said, cool. 49.5 % said, meh. But let's actually run through what happened and the implications, and then you can see what you think, because there is a strategy here. It may work, it may not, but let's talk about it, because this is a very big bet that Apple is making. We've been talking about it on the show for a while, and I think it's important to talk about where this might be going, because as Apple goes, often so goes the tech world, and they are going to drive a lot of this change, especially when it comes to consumer. So first of all, what did they announce? All right, to me, the biggest announcement was, of course, Apple Intelligence.

1:58And that's AI, not like a chatbot, but it's AI that goes really throughout the operating system. I'll just list a couple of the features that stood out. So first of all, Siri. And Siri is now going to understand the context of people's devices, and you'll be able to give it commands and operate the devices. So we all know the graphical user interface. This might be more like a voice interface that helps you operate your phone. It's not going to turn over everything. But it seems like, and especially over time, this may roll out that there's going to be a lot that you'll be able to do with just your voice in Siri.

2:33So for instance, there was one example where someone was like, in the demo, find me a photo. And then it said, enhance this photo. And Siri enhanced it using Apple's photo editing tools. And it said, drop it into my note about X. And they dropped it. And then Siri dropped it into the note. So this type of operating of the device is kind of interesting. And then you could also go deeper. And I think this one was my favorite. And I tweeted it out and got some action. It was play the podcast that my wife sent me the other day. and I think this matters because we're so fragmented in our devices right like we have the phone and then on the phone there's messaging maybe three or four messaging apps that most of us use regularly there's email we could have written it down in a note and the interesting thing here is that this new Apple intelligence that's what they're calling it we'll be able to scan all that stuff and through natural language we'll be able to call up what you're talking about and hand it over to you.

3:33So a much more easy operation of the device, if it works, if it works. And we're going to talk more about that momentarily. Now, some of these potential updates really get crazy. And there was a one process that they showed where someone gets a meeting put on their calendar, but they have to pick up their daughter shortly afterward. And the AI crunches how long it's going to take them to reach the school after that new meeting ends. I think this would be super valuable. And Apple is portraying it as something called personal intelligence. Like that's the main takeaway. What they're saying is we're going to take what Apple knows about you and we're going to use AI to make your life easier.

4:15It's not ChatGPT like at all, actually. It's not like speak with Siri and you'll be able to have conversations with our smart bot. It's effectively, we're going to use artificial intelligence in your personal context to make the things that you do every day a little bit easier. That's the message. It honestly, it felt a little bit Google-like, right? Google's been talking about this stuff with the Google Assistant. And of course they have mail and maps and they've been, you know, et cetera, et cetera. They've been working in photos. They've been working really hard and diligently to bring that all together.

4:48And it's gotten decently okay. I think that's probably what you could say about it. It's not like people are using the device a hundred percent for this personalized experience, but that's what the Google Android experience is like, and that's what they've always been building toward. And that seems to be a direction that Apple's taking. Very interestingly, they are going also assistive. It's not informational. It's assistive. The Siri goes from friend, which is how Steve Jobs initially anticipated it, to functional, so the operating system controlled with the voice. But I do want to be clear here.

5:23This is technology that you can make look really good in a demo, but it's just very difficult to deploy in practice. That if it works thing, it's a very big question. We're going to wait and see whether Apple can actually deliver on the promises made here today. Because if I know anything from covering tech for as many years as I have, it's that it can look really great on demo day. But then when you get the device in your hands, it just doesn't work exactly the way they showed it. and I think that's worth keeping in mind. Okay, we have a few other features. Sorry if you're hearing some of the wind blow by me and the leaves rustle, but that's just sort of the environment we're in right now.

6:03One was called Genmoji. It creates emojis with generative AI. So if you're like saying you're relaxing, they might make an emoji with like cucumbers in the eyes. That will be interesting, but we also wonder about the cross-platform stuff there. Apple, and this is something that's worth noting too, they are going to give you the opportunity to create images of your context, your context with AI. So there was one example of someone saying, my mom is like superwoman and the Apple's, Apple AI takes the photo of the mom and puts her in like a superwoman type of image. Obviously that's risky. You don't know what people are going to do with this stuff.

6:42Our kids are going to bully themselves, each other with this stuff. Big question. There are also, but we're going to come back to that in a moment. There are also writing tools that will help you write better and revise your writing. This is a kind of a table stakes AI piece of technology that we're seeing everywhere. And they're also going to use intelligence to prioritize some of your notifications. So we have all these notifications. What's the most important thing? We can get lost in them. If AI can figure out, given your context, what's most important, that's interesting. Okay. So that is the news.

7:12And here's how I think about what we saw. So the first thing, and I think we've talked about this on the show, is that Apple just needed to go bold. They needed to change the operating system. And if you view this as a computing shift, and I think it very well might be, right, this move to AI, we're going to go from a place where people were tapping through, where we are all tapping through our phones, to a place where you're going to start to be able to navigate your phone with voice, using AI as an assistant. And we've seen two really bad attempts at making this happen so far with the Rabbit R1 and the Humane pin.

7:51And so a lot of people have written this off. But I think that if one of those hit and Apple wasn't doing these things, then there was a chance that we would see Apple fall behind in a big way. So it had to get ahead of this in some way. So it did make the changes to the operating system. It wasn't just AI to make emojis. It wasn't just AI to read your voice memos. It was AI to change the way that you operate the phone. And I think that's the kind of the bold move that it needed to make. Also took some risks. Again, going back to this creating pictures of your contacts with Gen AI, Apple could have played it completely safe, right?

8:28The company likes to be in control and they'll be in less control now. I mean, you're going to have AI, effectively Apple's AI, creating, making decisions on the phone, but without giving up a little bit of that control, it would have been very difficult for this company to really say we're deep into AI. And of course, some of that's market-driven, but there's a technology aspect to this too. And I think Apple saw that and that's why they're making the move. So another point that I think is worth making is that this opens the device up and provides channels for it to take advantage of the next 18 months of AI development.

9:08So we all know that OpenAI has just begun to train its next big model and all the big computing platforms or AI research houses really are working to train their next models. And there's a belief that within the next 18 months, we're going to see whether the progress that we've seen to date from like, let's say, GPT 1, 2, 3, and 4 can continue. It's exponential progress as we move forward. and if it does you don't want to only then start building your product to have an operating system that reflects that you want to open the door and so even if what's happening right now isn't exactly you know if we if we're going to take the 45 percent meh response to today's event um as reflective of the general public and it may or may not but if let's say it is then you're it It almost doesn't matter because you have to put your device, if you're Apple, you have to put your device in position to be able to take advantage of those next updates.

10:11And Apple did today. So that was important. Also, something weird is that the OpenAI partnership was really a lot smaller than I expected. I think a lot of us expected. Sam Altman showed up. Many of us thought maybe he's going to be on stage. but the integration with OpenAI's ChatGPT is basically that Siri is going to suggest it. And it won't exactly have OpenAI technology throughout Apple devices. I thought maybe like some of this intelligence might be OpenAI powered. Some of the image generation might be AI powered. No. And they gathered a bunch of us, a lot of reporters, analysts, into the theater after the big event.

10:52And there was a Q &A with iJustine. She moderated it. And we had John G. Andrea, who runs AI at Apple, and Craig Federighi, who is their VP of engineering. And she asked about the partnership of, Justine asked about the partnership with OpenAI. And Federighi basically comes right out the back. And he says, sorry, Senior Vice President of Software Engineering, that's Federighi. He says, Apple intelligence and all of the experiences we talked about with Apple intelligence are built on top of Apple models before even beginning to answer the question about OpenAI. So clearly Apple built a lot more in-house than the early reports led on.

11:36And ChatGPT is kind of like a feature within a feature. And if OpenAI had built like all throughout, and we had talked about this in the past few weeks, all throughout, that would have been pretty interesting from OpenAI standpoint. point. But right now, it's the future within the future. And I just want to shout out Brian McCullough, you know, as we talked about this on the podcast a couple weeks ago, for saying, hey, look, you might be underwhelmed. I wouldn't say fully underwhelmed, but especially when it comes to OpenAI's interaction here, it wasn't what we thought. That being said, Google must still be, I think, a little bit pissed.

12:12So think about Google. Google pays Apple$20 billion a year. And now OpenAI is going to suggest actions to people, for instance, recipes, things like that, that they might otherwise have gone to search for. Google did not have its model included here. So there's no Gemini here, although Apple suggested that Gemini or other models are going to come in the future. But there was no Google. In fact, they even said that OpenAI is the best. And if I'm Google, I'm like, why am I paying you$20 billion? I mean, obviously, they're making money on the other side. But this is effectively the risk that a lot of folks have talked about for Google in terms of potentially being displaced by a platform shift.

12:53And there will be a counterpunch. They will integrate eventually. But I don't think it was a good day for them. And it was also a little bit of a weird day for Microsoft. Even though OpenAI didn't play a massive role in this release, Sam Altman was here today. There is going to be ChatGPT involved. So it is kind of interesting for Microsoft that they were there, that opening AI was there. All right, let's conclude and talk about the money. So I mentioned at the start that Apple is down 1.91 % today. Actually, I think that's a much better performance than I and many others anticipated. There was a view here that unless Apple knocked the socks off the audience, that this company's stock was going to get sold.

13:37and remember NVIDIA has passed it as the most valuable company, as the second most valuable publicly traded company in the world. Microsoft is number one. And Apple, I don't think, fully knocked the socks off of people, but still, it's been up 15 % since it started talking about AI a few months ago and 7 % on the month before this, ahead of this event. And it's only up 6 % over the past year, six and change. So overall, almost all of Apple's growth in the stock market, if you think about the past year, has come over the past month. And it's even more impactful when you think about the 15 % that it's gone up since it started talking about AI.

14:22So clearly there was a decline and then it bounced back up. So this story is allowing Apple's stock market valuation to go up. now where's this tech available interestingly it's only on available on the 15 iphone 15 pro and up and it will happen when ios 18 the next operating system comes out in um in the fall and a lot of people have said this is going to spark a massive upgrade cycle i don't know i don't know about that my perspective here is that it's going to really hinge on the early adopters if If the early adopters use this technology and they love it, then we might see that upgrade cycle.

15:04But one of the biggest problems with generative AI is the possibilities are so vast, but the direction is sometimes vague. Like ChatGPT had 100 million people use it in the first two months, and that was November 2022. We're sitting here in July 2024, and the latest publicly available number is still 100 million. and people have said maybe it's at 200 million, but even still, it's this vast potential that you can use generative AI for that people still haven't found natural uses that make it kind of tricky as a consumer bet. So even if these early adopters love it, I don't know if it's going to spark this massive upgrade cycle.

15:49And we should point out that Apple has had five of the last six quarters with revenue declines. that it's reported. So it might not spark this massive increase in sales for Apple that a lot of people are hoping for. So let me just close by reading a little bit of what M.G. Siegler wrote in their run-up to the event, thinking about how Wall Street is going to handle this stuff, because ultimately that's going to drive a lot of the company's strategy. He says, At the end of the day, Wall Street wants a narrative around growth, And Apple hasn't been providing much of one in the past few quarters with smartphone penetration nearing a ceiling in many of their key markets and China being erratic at best and the iPhone still being too expensive for the developing world.

16:41And the Vision Pro not having a clear path to impact the company's finances anytime soon. And the Car Project not having a clear path to impact the company's finances ever. So it's going to be services. And he points out about Apple that where's the path to make money from AI? He says they don't sell cloud platforms in the same way that Microsoft and Google do. I did Amazon. They don't sell chips in the same way that NVIDIA does. It's way, in a way, it's more like Meta, where they'll be using AI to augment their products. And that hasn't played so well for at least Wall Street, although Meta is doing great.

17:19But that's largely on the strength of its advertising. growth. So here's the deal. I mean, we're still in this moment where we're not 100 % sure how this wave of latest wave of generative AI is going to work for consumers. Businesses, it's great. Go ahead and find out what's going on within the company. This stuff really helps connect workflows. This stuff really helps consumer devices, consumer applications. That's really tricky. But for Apple, a move it had to make, I think bold in a way that it needed to be. and lots of questions for Apple, for Google, for Microsoft, for OpenAI remain to be answered.

17:59That's sort of what makes this fun. So we'll be back on the feed on Wednesday morning with M.G. Siegler talking in more depth about what was announced today. Just wanted to get on the feed today and do a quick recap and share with you what I felt here on the ground, because, I mean, flew all the way out to California, might as well give you, and sat here for the event, might as well give you this perspective as the event is coming to a close, or at least the first day of it. So there you have it. MG Siegler on the feed with me on Wednesday, talking more deeply about what this means for Apple. He's going to go way more in depth than I did today.

18:37And then Ranjan and I will be back on Friday, hopefully with another guest, hopefully with Mark Gurman. We'll see how that plays out. All right, thanks so much for listening, and we'll see you next time on Big Technology Podcast.