Ming-Chi Kuo stated that Apple faces two major challenges in developing AI, forcing it to collaborate with Google

Google and Apple recently issued a joint statement indicating that they have reached a multi-year cooperation agreement. Ming-Chi Kuo, an analyst at Tianfeng International Securities known as the "strongest Apple analyst," published an analysis stating that Apple faces two short-term challenges in developing its own AI, which compels it to collaborate with Google. These challenges are the need for a successful AI demonstration at this year's WWDC and the rising quality standards for AI services as cloud AI develops. Even if Apple fulfills its past commitments regarding Apple Intelligence and Siri, "it seems insufficient now," thus requiring a stronger device AI model.

AI Becoming Core is Inevitable

Kuo pointed out that while he does not expect device AI to boost hardware shipments in the short term, this collaboration can alleviate Apple's short-term pressures from various sources. However, it is inevitable that AI will become the core of hardware, operating systems, and user experience, so Apple will still face the challenge of enhancing its control over core AI technologies in the long term.

He also noted that Tesla's FSD is a good example of AI becoming central to devices and user experience. If Tesla's FSD algorithms came from other vendors, Tesla's competitive advantage and PE valuation would certainly be lower than they are now.

Additionally, Apple's self-developed AI server chips are expected to enter mass production in the second half of this year, and its own data centers are projected to begin construction and operation in 2027, which may indicate that Apple's demand for device AI is expected to see significant growth starting in 2027.

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