How Apple is Falling Behind in AI Race: Morgan Stanley

Apple vs AI competitors Apple is widely regarded as one of the most innovative and successful companies in the world, with a loyal fan base and a dominant position in the smartphone, tablet, and wearable markets. However, a recent report by Morgan Stanley suggests that Apple is lagging behind its competitors in the field of artificial intelligence (AI), which could pose a serious threat to its future growth and profitability.

AI is the field of computer science that deals with creating machines and software that can perform tasks that normally require human intelligence, such as reasoning, learning, decision making, and natural language processing. AI has become a key driver of innovation and disruption in various industries, such as e-commerce, health care, education, entertainment, and transportation.

According to the Morgan Stanley report, Apple ranks fifth among the top 10 global companies in terms of AI investments, behind Google, Amazon, Microsoft, and Facebook. The report estimates that Apple spent $2.7 billion on AI research and development in 2023, which is only 6.5% of its total R&D budget. In comparison, Google spent $27.6 billion on AI R&D, which is 23.8% of its total R&D budget.

The report also points out that Apple has a lower number of AI-related patents, publications, and acquisitions than its rivals. Apple has 1,573 AI patents, 1,028 AI publications, and 29 AI acquisitions, while Google has 12,368 AI patents, 25,039 AI publications, and 52 AI acquisitions.

The report argues that Apple’s relatively low investment and output in AI could have negative implications for its competitive edge and customer loyalty, as AI becomes more integrated and influential in the products and services that consumers use every day. For example, the report cites the following areas where Apple is falling behind in AI: Apple vs AI competitors

Voice assistants: Apple’s Siri is widely considered to be inferior to Google’s Assistant and Amazon’s Alexa in terms of accuracy, functionality, and personalization. Siri often fails to understand or answer complex queries, has limited integration with third-party apps and devices, and lacks the ability to learn from user feedback and preferences. The report estimates that Siri has a 75% accuracy rate, while Google Assistant has a 92% accuracy rate. Search engines: Apple’s default search engine is Google, which pays Apple billions of dollars every year for the privilege. However, this also means that Apple is dependent on Google for providing its users with relevant and reliable information, and that it is missing out on the opportunity to leverage its own data and user behavior to create a more customized and engaging search experience. The report suggests that Apple could develop its own search engine, or partner with another provider, such as Microsoft’s Bing or DuckDuckGo, to reduce its reliance on Google and improve its AI capabilities. Cloud services: Apple’s iCloud is mainly used for storing and syncing data across Apple devices, such as photos, contacts, calendars, and documents. However, it does not offer the same level of cloud computing and AI services that Google, Amazon, and Microsoft do, such as machine learning, natural language processing, computer vision, and speech recognition. These services enable developers and businesses to create and deploy AI-powered applications and solutions, such as chatbots, recommendation systems, image recognition, and sentiment analysis. The report notes that Apple has a 3% market share in the global cloud infrastructure market, while Google has 9%, Amazon has 32%, and Microsoft has 18%. Apple vs AI competitors

The report concludes that Apple needs to increase its investment and focus on AI, and to adopt a more open and collaborative approach to AI innovation, in order to maintain its leadership and reputation in the tech industry. The report suggests that Apple could:

Hire more AI talent: Apple could recruit more AI experts and researchers, both internally and externally, and offer them more incentives and autonomy to work on cutting-edge AI projects and products. Apple could also foster a more AI-friendly culture and environment, by encouraging more experimentation, risk-taking, and sharing of ideas and insights. Acquire more AI companies: Apple could acquire more AI startups and companies, especially those that have expertise and experience in areas where Apple is weak or lacking, such as voice assistants, search engines, and cloud services. Apple could also integrate and leverage the AI technologies and solutions of these companies into its own products and platforms, and benefit from their customer base and network. Partner with more AI players: Apple could partner with more AI players, such as universities, research institutes, industry associations, and other tech companies, to access more AI resources, data, and knowledge, and to collaborate on AI initiatives and standards. Apple could also participate more actively and constructively in the AI community and ecosystem, by contributing to AI publications, conferences, and forums, and by supporting AI education and ethics.

By leveraging AI for its products and services, Apple could enhance its user experience, engagement, and loyalty, and create new value propositions and revenue streams. AI could also help Apple differentiate itself from its competitors, and create a competitive advantage in the rapidly evolving and expanding tech market.

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