This past week, Apple did something that has me completely baffled.
No, I’m not referring to the debut of the Vision Pro, the company’s $3,499 virtual-reality headset, which won’t actually be available until sometime next year. (Though there are some baffling elements of that launch as well, which I’ll get to in a bit.)
What I don’t understand is how Apple (ticker: AAPL) managed to deliver a more than two-hour keynote and not say the words “generative AI.”
As someone who writes about this stuff every day, I can barely have a five-minute conversation with anyone in the technology business without it turning into a discussion of artificial intelligence and how it’s going to change the world.
In just the past week alone, Intuit (INTU) announced a potentially game-changing AI strategy, Cisco Systems (CSCO) unveiled new AI features in its WebEx communications software, and Adobe (ADBE) disclosed plans to start charging companies who use Firefly, the company’s growing suite of generative AI tools.
Now, to be clear, Apple has no need to aggressively promote its stock with overly excited predictions about AI. It’s the largest U.S. company by market value, at close to $3 trillion. The stock is up 37% year to date, and has recently traded at all-time highs. Also, Apple already uses artificial intelligence for some things, like predictive typing and auto-correct features, both of which got a brief mention at this past week’s keynote address. But what’s Apple’s larger AI strategy? Don’t they need one?
Apple didn’t answer my request for comment on that topic.
If you count other tech leaders in order of their market value, the next 15 or so have all laid out detailed plans to play the AI trend in one way or another: Microsoft (MSFT) and Alphabet (GOOGL) have chatbots and have unveiled plans to integrate AI features into most of their application software. Amazon.com (AMZN) is building AI tools for Amazon Web Services.
Nvidia’s (NVDA) AI-friendly chips have propelled the stock to a 160% gain this year and a recent visit to the $1 trillion market-cap club. Then you’ve got Tesla (TSLA), Meta Platforms (META), Taiwan Semiconductor Manufacturing (TSM), Broadcom (AVGO), and Oracle (ORCL)—AI plays, one and all.
Meanwhile, it has been nearly 12 years since Apple launched Siri, the company’s virtual assistant. But its growth seems stunted. Since Siri is integrated into my phone, I can ask it to do some useful things while I drive, like “call Steve” or “text Tim.” But it’s not a great option if you need to generate code or draft documents—all things now offered by ChatGPT, Bing, and Bard.
Maybe this is complicated by Apple’s longstanding search relationship with Google, which pays billions to Apple every year to remain as the iPhone’s default search provider. Or maybe the company has been too distracted by the Vision Pro launch. Or maybe Apple has something brilliant coming that has yet to launch or leak.
But if Apple doesn’t lay out an AI strategy soon, investors are going to get nervous that Apple is missing out on the greatest technological advance since...the iPhone.
OK, let’s come back to the Vision Pro for a moment. As has been widely discussed, the price was higher than Wall Street expected, and the launch date further out than anticipated. Even Wedbush Securities’ Dan Ives, maybe the Street’s biggest Apple bull, thinks the company will sell only 150,000 units in the first year, and then one million in the second year once it lowers the price.
Either way, it’s not enough. Apple is generating about $400 billion in annual revenue. To be material—let’s say a 5% revenue boost—it would need to sell $20 billion a year in Vision Pro hardware. At the current price, that would be a little under six million units. The 2022 market for virtual- and augmented-reality headsets was a little under $8 billion. Even if the market doubled and Apple took all of it—driving market leader Meta’s Quest unit out of business—it still wouldn’t be enough to move the needle in the long term. Apple is playing a long, long game here.
Many people who had a chance to try out the device—and I have not—seemed wowed by the experience. But as others have noted, there is simply no “killer app” for the Vision Pro. And you have to wonder if developers might be better off creating new apps for the iPhone, where more than 200 million units will likely be sold in the current fiscal year. Also, why didn’t we see Tim Cook try it on?
One final observation: This doesn’t feel like an all-day device. As I sit here typing on my MacBook Air, my iPhone is next to me and my Apple Watch is on my wrist. Aside from when I’m sleeping, at least two, and generally three, Apple devices are always nearby. They are indispensable for me and many others. But the Vision Pro just feels like a beautifully engineered solution in search of a problem. Aside from Meta’s far cheaper Quest headsets, there are few success stories in this space.
And Apple has failed to overcome the most obvious problem: The requirement to wear what are essentially ski goggles.
Would you ever wear this thing outside? That would be a bad idea—do you remember what happened to people who wore Google Glass in public? Bars banned them; they tended to spur fights. I am reminded of the 3-D television era, which promised a slew of new experiences. But they never caught on. Anyone need a pair of 3-D glasses? Didn’t think so.