The discussion highlights Apple’s delayed AI advancements and potential market challenges, contrasting with Alphabet’s aggressive AI integration and hardware innovation from competitors like Samsung. Meanwhile, Amazon’s cloud business faces margin pressures but maintains dominance, with a clear AI strategy focused on hosting large language models and generating revenue through cloud services rather than proprietary AI products.
The discussion begins with a skeptical view on Apple’s stock performance, emphasizing that without a new iPhone replacement cycle, the stock is unlikely to outperform. Despite Tim Cook mentioning 20 generative AI capabilities in the current iPhone, the anticipated significant AI upgrade is delayed until next year, two years later than originally promised. This delay suggests that consumers may hold off on upgrading their iPhones this year, potentially weakening Apple’s market position.
In contrast, Alphabet (Google) is actively integrating generative AI features across its products, including Android, which directly competes with Apple’s iOS. This aggressive AI integration could entice users to switch from iPhones to Android devices, especially as iPhones age without compelling new features. Samsung and other manufacturers are also advancing in hardware innovation, particularly with foldable phones, further intensifying competition in the smartphone market.
The conversation then shifts to Amazon, focusing on its cloud business. While Amazon’s cloud growth rate met analyst expectations at 17%, it lagged behind competitors like Microsoft and Google, particularly in terms of cloud margins, which dropped from 39% to 32%. This margin pressure is attributed to capacity constraints and aggressive price competition, leading to concerns that Amazon may be losing cloud business to rivals despite being the largest cloud provider.
Despite these challenges, Amazon’s cloud remains dominant, with a significant portion of companies still operating on physical servers and needing to transition to the cloud. The current issues are viewed as short-term, with Amazon’s leadership, particularly CEO Andy Jassy, seen as well-suited to address these problems. However, investors remain frustrated with Amazon’s heavy spending on ventures like Kuiper and Alexa, which have yet to generate revenue but require substantial capital investment.
Finally, Amazon’s AI strategy is highlighted as clearer and more defined compared to Apple’s. Amazon aims to be the primary cloud host for all large language models, focusing on generating revenue through cloud fees rather than proprietary AI products. This approach positions Amazon as a central player in the AI infrastructure space, leveraging its cloud dominance to capitalize on the growing demand for AI services across various businesses.