Apple faces calls to reboot AI strategy with shares slumping

The Star

20 hours ago

Apple Inc. is facing pressure to shake up its corporate playbook to invigorate its struggling artificial intelligence efforts.
Alarmed by a share slump that's erased more than US$630bil (RM2.3 trillion) in market value this year and frustrated with delays in rolling out AI features, investors are calling for Apple to break with long-standing traditions to make a big acquisition and more aggressively pursue talent.
"Historically Apple does not do big mergers and acquisitions,' said Citigroup Inc. analyst Atif Malik, noting that the last major deal was its takeover of Beats in 2014. But, he argues, "investors would turn more positive if Apple could acquire or invest a meaningful stake in an established AI provider.'
Apple shares have fallen 16% this year while traders bid up the shares of peers like Meta Platforms Inc., which is spending lavishly on AI. While Apple faces other problems, including its exposure to tariffs and regulatory issues, disappointment in bringing compelling AI features to its vast ecosystem of devices has become top of mind for investors.
Apple didn't respond to a request for comment.
The company has long shunned acquisitions in favour of building its own products. The largest acquisition in Apple's history was a US$3bil (RM12.7bil) deal for headphone maker Beats more than a decade ago.
There are signs that Apple may be warming up to such a move. Bloomberg News reported last month that executives have held internal talks about making an offer for AI startup Perplexity AI, which would add talent and help Apple develop an AI-based search engine. The startup recently completed an investment round that valued it at US$14bil (RM59.4bil).
Dan Ives, an analyst at Wedbush who is a long-time Apple bull, called buying Perplexity a "no-brainer,' and said even if Apple paid US$30bil (RM127.4bil), that sum would be "a drop in the bucket relative to the monetisation opportunity Apple can achieve on AI.'
Since unveiling its AI vision more than a year ago, Apple's rollouts of new features have underwhelmed, such as those unveiled at its Worldwide Developers Conference last month. The company has reportedly considered using AI tech from outside companies, rather than in-house models, to power a new version of its Siri digital assistant.
Kevin Cook, a senior stock strategist at Zacks Investment Research, wants Apple to be more like Meta when it comes to hiring AI experts but stops short of calling for more dramatic changes, saying that concerns about its AI shortfalls are overblown.
"A refocus on AI talent is what's needed,' said Cook. "Apple certainly has challenges, but this isn't like Google, which could more easily have been usurped by competitors if it fell behind,' he said.
Meta Chief Executive Officer Mark Zuckerberg has spared no expense in pursuing his AI ambitions. The Facebook owner recently lured an engineer that ran Apple's AI models team with a pay package in the hundreds of millions of dollars over a several year period and Apple didn't try to match the offer, Bloomberg News reported last week. That followed Meta's deal to invest US$14.3bil (RM60.7bil) in Scale AI last month.
Of course, Apple has plenty of resources at its disposal to make similar moves. The company had cash and marketable securities of US$133bil (RM564.7bil) at the end of March, nearly twice the cash on Meta's balance sheet.
There have been some notable changes at Apple recently. Chief Operating Officer Jeff Williams is retiring after a decade in that role. And Luca Maestri, Apple's longtime chief financial officer, stepped down last year.
Over the weekend, Bloomberg News reported that chief executive officer Tim Cook will stay put, though the company is preparing for a broad management shake-up.
Analysts at LightShed Partners say a shake-up is "exactly what Apple needs right now,' even if that means Cook is replaced as CEO. "Missing on AI could fundamentally alter the company's long-term trajectory and ability to grow at all,' Walter Piecyk and Joe Galone wrote in a note to clients on July 9.
While not calling for a change in leadership at the top, Paul Meeks, senior analyst and managing director at Water Tower Research, agrees that the iPhone maker needs to do "something bold.'
"A significant deal would not only help them in AI, but show it is committed to a culture change and course correction. It can't do AI on its own,' he said.
Bloomberg's Magnificent 7 index has rallied nearly 40% from an April low. lifted by performances from some of its components like Nvidia Corp., Meta Platforms Inc. and Microsoft Corp. The equal-weighted gauge of the stocks, which also includes Apple Inc., Alphabet Inc., Amazon.com Inc. and Tesla Inc., is inching toward an all-time high set in December last year. – Bloomberg