While Apple celebrates the success of its film “F1,” Wall Street’s reactions to its announcements in artificial intelligence reveal a deep problem. An analysis of Apple’s long-term services strategy versus its concerning stumbles in the AI race.
Introduction: A triumph and a defeat in one month
Apple witnessed two major launches last month, and they could not have been more different. First, the company unveiled some developments in artificial intelligence it had been working on during the developer sessions of its operating systems, amid muted applause at its annual Worldwide Developers Conference (WWDC). Then, at the end of the month, Apple walked the red carpet as its first true blockbuster film, “F1,” grossed over $155 million—alongside positive reviews—in its opening weekend.
While “F1” served as a victory lap for Apple, highlighting the strength of its long-term vision, growth in its services business, and ability to tap into culture, Wall Street’s reactions to the WWDC artificial intelligence announcements point to underlying trouble. It is a tale of two companies in one: the patient, leading Apple, and the anxious, lagging Apple.
Services success: A lesson in long-term vision
The film “F1” showed Apple at its best—specifically, its ability to invest in new, long-term projects. When Apple TV+ launched in 2019, it had only a handful of original shows and one movie. Although many dismissed Apple TV+ as an expensive side project, Apple stuck to its plan over the years, expanding its staff and operations. This allowed the company to build strong relationships in Hollywood and a track record in entertainment. Now, an Apple-produced film can top the box office on a summer weekend.
The success of “F1” is not just a matter of profits. Apple’s Hollywood productions are perhaps the most prominent face of the company’s services business, a profit driver that has become a favorite among investors since the company began highlighting the division in 2016.
AI struggles: A check-engine light that won’t turn off
If “F1” is a sign that Apple’s services business is running at full capacity, the company’s struggles in artificial intelligence are like a check-engine light that won’t turn off. At WWDC, Wall Street was eager to hear the company’s plans for Apple Intelligence, the suite of AI features it first unveiled in 2024. But the initial rollout was plagued by delays and disappointing features.
Apple did not reveal what investors and consumers increasingly want: an advanced Siri assistant that can hold a fluent conversation and complete tasks, such as making a restaurant reservation. In the era of ChatGPT, consumer expectations for AI assistants have moved far beyond asking, “Siri, what’s the weather like?” Fourteen years since Siri’s launch, it remains essentially the same rigid Q&A system that struggles with open-ended questions.
The ownership paradox: Is Apple abandoning its core strategy?
Wall Street’s anxiety over Apple’s AI struggles was evident this week after Bloomberg reported that Apple is considering replacing Siri’s engine with technology from Anthropic or OpenAI, rather than its own foundational models. This move, if it happens, would contradict one of Apple’s most important strategies under Tim Cook: Apple wants to own its core technologies, not buy them from suppliers.
Using outside technology would be an admission that Apple’s foundational models are not yet good enough for what the company wants to do with Siri. Laura Martin, senior internet analyst at Needham, said: “They have fallen further and further behind, and they need to supercharge their generative AI efforts. They cannot do it internally.”
Conclusion: A missing long-term plan
Apple’s success in services with projects like “F1” is an example of what the company can do when it sets clear goals in public and then executes them over long periods. Its AI strategy could benefit from a similar long-term plan, as customers and investors wonder when Apple will fully embrace the technology that has captivated Silicon Valley. While Tim Cook shakes hands with movie stars, the real race may be passing Apple by before it can catch up.
