Apple's WWDC is here. Investors are still waiting on that AI promise.
Apple's Worldwide Developers Conference kicks off Monday with muted expectations from Wall Street—and the risk of last year's unfulfilled AI promises overshadowing the conference.
In 2024, the company put out its answer to 'what's Apple going to do with AI?" The announcements included a range of new features under the banner of 'Apple Intelligence," but the rollout was delayed.
'Expectations are rightfully tempered this year at WWDC relative to prior years where we had more material announcements," wrote Evercore ISI's Amit Daryanani in a note to clients last week.
Like many, Apple was taken by surprise by the November 2022 launch of OpenAI's ChatGPT, the match that lit the current AI boom. Apple had long been successfully using AI throughout its products for specific features like making photos, videos and audio higher quality, but had failed to make Siri a useful conversational assistant, like the new generation of chatbots are providing.
At WWDC 2024, Apple announced some new AI features that were becoming common elsewhere, such as text and image generation, and notification summaries. But the big new advance would be a redesigned Siri—a real assistant that could work across installed apps and the web, creating automated workflows from simple conversational commands.
But the rollout was delayed last fall and on arrival it omitted the new Siri, for which Apple users are still waiting. Existing features have been underwhelming and were met with poor reviews.
'Apple's made this promise, this huge thing is coming that's going to change everything across their whole lineup," said prominent tech reviewer Marques Brownlee in November, as features were rolling out. 'They've been talking about it for a while, and I think that promise is starting to fade."
In a March statement to Apple blogger John Gruber, an Apple spokesperson admitted that the new Siri is 'going to take us longer than we thought to deliver on these features and we anticipate rolling them out in the coming year."
On its May earnings call, Apple CEO Tim Cook made similar remarks.
Ben Reitzes of Melius Research said that management can't be pleased as it gears up for the conference, 'but we have no doubt they are making adjustments to the strategy behind the scenes."
'However, it is unlikely we'll hear the company outline precise aspects of its upcoming product plans until September," Reitzes said.
Even if it is racing from behind, no one should count Apple out yet. Its biggest strength is its installed base of over two billion devices. Anything it puts out will instantly be in front of a huge number of people. But Apple needs to do better than it has to date to get those users engaged, and that has resulted in a leadership shake-up for this new version of Siri.
A large part of the problem is self-inflicted by other Apple concerns. Privacy and security are at the heart of everything Apple does, and it would prefer that neither Apple or anyone else have access to your conversations with Siri. The best way to do this is for everything to happen on the device, not in the cloud somewhere, and this is how most of Apple's legacy AI features work.
The first layer of Apple Intelligence is on-device AI, but this is hampered by the limited computing and memory capabilities of consumer devices, and results are mixed. Apple has also built its own cloud, called Private Cloud Compute, and its first order of business is that no one can see user chats. Apple wants to control the hardware and software so it can guarantee private and secure chats, but this puts it at a disadvantage to the Nvidia technology that so many competitors use.
That is why, at least for now, Apple is forced to fall back on the third layer of Apple Intelligence, ChatGPT, where Apple cannot guarantee user privacy.
Security and privacy may turn out to be Apple's biggest hurdles in creating the Siri that its users would like to have, and that Apple promised them a year ago.
Apple wasn't the first to make a PC, smartphone, tablet or smartwatch, but it eventually made category-defining products for all of them. Making Apple Intelligence a leader will be more difficult than any of those.
Write to Adam Levine at adam.levine@barrons.com
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