2024: The year Apple became an AI company

The big pivot: 2024 saw Apple steer its massive ship away from a decade-long ambition to produce EVs and into the uncharted waters of artificial intelligence, which it sought to dominate through its global iPhone and Mac install base.

• The transition was not smooth. The company halted its ambitious “Project Titan” EV project while shifting more than 2,000 employees to generative AI (genAI) initiatives. 
• Apple, which has acquired more AI companies than its rivals in the past decade, faced intense competition from AI startups like OpenAI and Anthropic, as well as Big Tech rivals Microsoft, Google, and Meta, who were all ahead in the AI race.
• With Apple Intelligence rolling out in stages, it remains to be seen if it can push the envelope for on-device AI use and trigger a smartphone upgrade supercycle.

That last part could be challenging given that 45% of US adults say they don’t plan to use AI features on smartphones, per YouGov.

AI integration takes center stage: In June, the company announced Apple Intelligence, encompassing AI for text and image generation, personalized Siri functions, and on-device data processing but contained within Apple’s secure enclave.

• Apple put the AI cart before the horse, shipping AI-capable Macs and iPhone 15 Pro a year before and iPhone 16 smartphones a month before the AI functionality began rolling out. 
• The company rolled out Visual Intelligence, Image Playground, Genmoji, and ChatGPT integration to Apple Intelligence-compatible devices in December.

Beyond AI devices and services, Apple leaned into AI infrastructure, collaborating with Google for AI processing units rather than relying on Nvidia. In addition, Apple is developing its own Project ACDC servers to reduce reliance on third-party data center providers.

Regulatory challenges take away from AI focus: Apple is delaying its AI rollout in the EU over the region’s regulatory climate. And it has cause for concerns—the company was investigated and fined multiple times over its walled garden.

• Apple faces EU accusations of violating the Digital Markets Act (DMA) by restricting alternative app stores, and fines could be up to €35 billion ($38 billion). 
• EU regulators fined the company €1.84 billion ($1.95 billion) for its App Store practices, and noncompliance could further affect its AI ambitions. Additional scrutiny in Japan and the UK adds pressure to its business model.
• Apple’s efforts to appease regulators include revamping some of its operations in the EU and opening up its devices to third-party marketplaces.

Despite Apple’s reported adjustments for compliance, the EU remains dissatisfied, spotlighting the need for Big Tech to rethink app ecosystem dynamics.

Our take: In 2025, Apple’s shift to AI aims to redefine services and devices. Its challenge will be blending innovation with intensifying regulatory hurdles. 

EU fines loom, making compliance essential as Apple pushes to lead in the AI space. This balance could define Apple’s future as an AI player.

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