Why Apple’s AI announcement this week is a big deal…

VaselineSeptember 14, 2024

0 5 minutes read

Why Apple’s AI announcement this week is a big deal…

Apple’s AI announcement this week was a big deal. But here’s who really benefits…

On September 9, Apple Inc. (AAPL) sought to dazzle the public with an engaging announcement about the iPhone 16. The new AI-centric device will be able to sort messages, offer typing suggestions, and use a more capable Siri virtual assistant. The new smartphones will also be powered by the latest A18 chips – a design that is 30% faster than its predecessor.

However, the presentation seemed to miss the mark. Google searches for iPhones remained relatively subdued … news outlets devoted little effort to covering the event … and investors responded with a collective yawn. Apple shares were trading exactly flat for the day.

So why the lack of enthusiasm?

Well, part of the reason could simply be because Apple has been a bit behind when it comes to the AI Revolution.

But this is nothing new for Apple. Contrary to what most people think, Apple has never been on the edge of technological innovation. What makes Apple, frankly, Apple, is its ability to perfect technology for the masses.

So despite the lukewarm reaction from the media and the public, the news that Apple is integrating AI into its phones is a big deal, folks. More important is the news that instead of outsourcing the work, the world’s largest company will build its own in-house AI system.

If you build it, they will come…

Apple’s decision to build its own AI system is significant because not all tech companies are dedicating the resources to do so.

Microsoft Corp. (MSFT) relies heavily on OpenAI to power its generative AI systems. New generation Alexa smart speakers from Amazon.com Inc. (AMZN) will use Anthropic’s Claude to work. And the use of third-party AI systems is even more prevalent among smaller players. Some startups have even been accused of passing off other AI chatbots as their own, a process known as third-party software “wrapping.”

And that means the world’s most valuable company will soon become another big buyer of the chips needed to perform the massive number of calculations needed to train AI models, and an even bigger buyer of the low-power AI chips needed to run these applications on the phones.

In other words, the most valuable company in the world (Apple) is now dedicated to casting billions of dollars in chip companies in chip companies that are making the AI revolution possible.

It’s hard to overstate the dollar amounts.

We all know that training new AI models is difficult. OpenAI reportedly spent $100 million to train its initial GPT-4 model, and Google’s Gemini Ultra cost almost twice as much. Apple will likely spend even more, given the ever-increasing costs of each new generation of large language models (LLM).

But the biggest cost of LLMs ultimately comes from managing them. Many believe that OpenAI spends nearly $7 billion per year on inference (ie, running existing models), or 70 times what it spent on training GPT-4. And an IBM product manager survey estimates that 95 percent of AI spending is on inference versus training.

Who Benefits

This will create wealth for companies like Arm Holdings PLC (ARM), which excels at designing the kinds of energy-efficient AI chips that battery-constrained smartphones need. Apple’s iPhone 16 will offer on-device AI as its first port of call (rather than sending queries to offsite data centers), and the Arm chips (namely, the A18) running those queries will fetch twice the royalties than previous generations. .

But once again, NVIDIA Corporation (NVDA), the AI chip leader, will also benefit. In addition to the on-board AI capabilities, the iPhone 16s will send more complex queries to offsite data centers, where they will be processed by higher-powered chips. NVIDIA is the leader in this field, and the performance requirements of the iPhone will almost certainly channel Apple’s investment to this GPU maker.

To illustrate the importance of NVIDIA, I want to remind you of the story I told you about on Friday night. 360 Square.

In 2023, Meta Platforms Inc. (THE TARGET) quietly launched the next-generation smart glasses in partnership with Ray-Ban. Users can snap a photo of their surroundings and within two seconds, the sunglasses’ miniature speaker will tell the wearer what they’re seeing. It became a surprise hit among the legally blind.

The magic of using it comes down to speed. Previous generations of image recognition software could take five seconds or more to analyze an image… and often produce the wrong results.

The latest Meta LLMs, known as Llama 3, are now the fastest current generation products on the market. This is what allows Meta/Ray-Ban smart glasses to capture an image, send it to an external data center and receive instructions for the speaker in less than two seconds.

As mentioned before, this two second rule is everything when it comes to usage. Web developers have long known that most Internet users will leave a site that takes more than two seconds to load, and operating systems use a two-second rule with tasks like app switching and launch times.

This creates incredible demand for companies like NVIDIA, whose chips can shave fractions of a second off AI calculations.

A study by renowned website Tom’s Hardware found that Nvidia’s flagship H100 AI chip can complete tasks in 1.7 seconds – compared to 2.5 seconds for an equivalent. Advanced Micro Devices Inc. (AMD) chip. So even though NVIDIA’s chip isn’t 3x faster than rivals, they still charge about 3x more because speed is so important when MILLISECONDS they are essential.

Still the market leader

That’s why, as I explained to myself Growing Investor subscribers, I wasn’t nervous when NVIDIA suddenly sold off following its latest quarterly earnings announcement. In fact, I saw it as an incredible opportunity to buy the dip.

Here’s what we said following the company’s second-quarter earnings news:

The Bottom Line: While Wall Street was clearly looking for a bigger bottom line, I’m excited about NVIDIA’s results. This stock is a game changer and you should own as much as you can – and that means today’s dip is a buying opportunity.

So even though NVIDIA has been down over the past month, it was clear to me that this was a technical sell that was completely detached from reality. And sure enough, the stock came back with a vengeance this week, with the stock up more than 15%.

conclusion

Apple iPhone 16 news is great for iPhone fans. Some speculate that the release of Apple Intelligence will spur a supercycle of iPhone upgrades and breathe new life into sales of the company’s devices. Others point to Apple’s entry into the race as a watershed moment that will serve to embed AI into consumer consciousness.

All that remains to be seen, of course… But if this happens, then the financial benefits will also accrue to the chipmakers who hold the monopoly on the technology that Apple needs.

This starts with NVIDIA, folks. Like I said yesterday, it’s just an incredible company to be with amazing fundamentals. We are currently up over 2,700% from our position in the Growing Investor – and I think there is more money to be made in the future.

But this is just the beginning… The AI revolution will change life as we know it – and faster than you can imagine.

That’s why I created one new report with details on nine world-class AI and quantum computing stocks to buy now.

Go here to find out how to get your hands on this report now.

(Already a Growing Investor subscriber? Click here to log in to the members-only website.)

Sincerely,

Louis Navellier

Editor, 360 Square

The Publisher hereby discloses that, as of the date of this e-mail, the Publisher owns, directly or indirectly, the following securities that are the subject of commentary, analysis, opinions, advice or recommendations in, or are otherwise referred to in, the essay presented above down:

Microsoft Corp. (MSFT) and NVIDIA Corporation (NVDA)

VaselineSeptember 14, 2024

0 5 minutes read

Vaseline

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