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The Apple AI Festivus Brings All-Time Highs and Only Elon Musk Is Mad...

Elon Is Probably Right

I am bringing back Stocktoberfest. Come to Coronado, San Diego October 20-22

A modern and fresh investor conference designed for today's retail and institutional investor. Get actionable insights and learn about the latest investing & data trends. Secure your tickets here.

Good morning from my flight back to San Diego from New York.

Trends With Friends podcast will go out tomorrow

It was a gorgeous day in Manhattan yesterday and after a full day of meetings, Rachel and I spent four hours walking around the city before a late dinner with some friends (old and new) in from Tel Aviv. While we had many laughs, of course we talked about the war and Rachel and I heard some horror stories, discussed some hard truths and shed a few tears.


The other day in my newsletter I promised to share some notes on the Apple WWDC and AI announcements so here we go…

I can guarantee that much like Apple did to Goldman Sachs with Apple ‘credit’ (Goldman recently gave up and walked away) Open AI won’t see much if any revenue from working with Apple. Sam Altman will have to raise tens of billions more from Venture Capitalists to keep up with the prompt growth from Apple’s distribution and the planet will heat up further.

Elon Musk is fuming. I understand…he would prefer Apple continue to piss money away building a car and goggles but they have moved on to AI. Now that they are all in on AI, Elon believes they cannot be trusted. I am cool with Elon being miserable, because he is a prick, and all his money and fame means is no cure, but I am sure there is some truth in his worries.

This is an interesting solution that puts the degree of desired privacy into the users’ hands. But it’s not a perfect solution for all.

Elon Musk has already taken a stand against Apple’s planned incorporation of OpenAI’s ChatGPT with Apple’s iOS 18. And he’s not wrong.

Musk announced that he would ban the use of Apple devices at his companies if Apple launches with GPT-4o integrated with its operating system.

The issue isn’t just a Musk issue — it’s actually an issue that any corporation or government should be concerned about. 

If an employee or executive prompts ChatGPT for help with sensitive government/company information, that information will be sent back to OpenAI for processing.

That means that OpenAI, a for-profit company, would have to be trusted with sensitive information. And that’s the problem.

And it doesn’t help that OpenAI was already found to have been programming bias and political narrative into its own generative AI.

While Musk may have been the first to speak out about this issue, its critically important to all.

Ben Thompson has an excellent piece out titled ‘Apple Intelligence Is Right On Time’. The gist (and why $aapl and $goog are my fave stocks):

Once again, we see how Apple (along with Google/Android and Microsoft/Windows) is located at the point of maximum leverage in terms of incorporating AI into consumer-facing applications: figuring out what AI applications should be run where and when is going to be a very difficult problem as long as AI performance is not “good enough”, which is likely to be the case for the foreseeable future; that means that the entity that can integrate on-device and cloud processing is going to be the best positioned to provide a platform for future applications, which is to say that the current operating system providers are the best-placed to be the platforms of the future, not just today.

My pal Michael (he will be at Stocktoberfest speaking on all things AI) explains exactly what Apple has in mind with AI from listening and watching the event:

And I’d like to underline one thing in my view that Apple IS CLEARLY doing. And it’s again thinking VERY different than what most might expect them to do at this AI Tech Wave. Especially as many believe still that Apple is coming from behind on AI. (Pro tip: They’re not, as I’ve been arguing for some time).

Apple is doing something very different here, and perhaps the market is slowly realizing its merits.

To be clear, the core takeaway for me on Apple post WWDC 2024, is that Apple is NOT integrating deeply with OpenAI, Google or others on AI to get their AI capabilities into Apple as fast as possible. 

It’s very clear after WWDC 2024, that Apple is building its own deep down secure and private AI infrastructure both in cloud and devices, to provide Apple versions of what it think these Generative AI technologies can do from the devices out, not the cloud in. 

It will take time, billions in investment, and a bottom up software and hardware AI redo effort ACROSS every nook and cranny of Apple’s ecosystem. 

And slowly show clear benefits to mainstream users what this AI thing maybe all about. While assuring them that it’s as Safe as possible, with a laser-focus on user Privacy, building on their reservoir of Trust. At Scale.

So they will do the ABSOLUTE MINIMUM amount of integrating any external AI systems. 

And make sure the broader LLM ‘AI world’ is ’Opt-in’ for their users only, every time they invoke the external AI chatbot. 

In the meantime, Apple is aggressively focused on getting millions of developers on the Apple ecosystem to build bottom up AI services (the ‘Apple Intelligence’ kind) WITHIN the Apple ecosystem. 

In my view, they have a better than even chance of pulling that off, given how mainstream users barely understand what ‘AI’ is about, and are generally fearful of it.

So it’s a diametrically opposite strategy than peers. Thinking Small, to get really Big.

For folks with longer memories of earlier tech waves, it’s kind of like how AOL showed tens of millions what the ‘Internet’ was in the 1990s, after Netscape wowed the world with their browser in 1995.

I hope this helps.

Have a great Friday.


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