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At CES 2024 (Consumer Electronics Show), investors paid close attention to Apple (AAPL) and Microsoft (MSFT), but that was short-lived as Microsoft dethroned itself as the most valuable company for the first time since 2021. This is because the. Microsoft has made a lot of money. From the purchase of OpenAI to the chatter surrounding ChatGPT, the ground is ripe for AI investment and development, while Apple grapples with weak iPhone demand, particularly in China.
R “Ray” Wang, Founder and Principal Analyst at Constellation Research, joins Yahoo Finance to provide insight into Apple’s AI strategy and share some of the latest innovations seen at CES.
“What we’ve seen in the last few quarters is that even though revenue is down, profits are still up. It’s a streamlined service equation that makes it much more profitable than launching hardware. That’s because high-quality services are actually growing,” Wang said. apple. “I think we’ve probably seen a similar trend. But we’re doing checks on our suppliers, and they’re not as sensitive. In the sense that they’re saying… we’re seeing a decline. The main reason for that is that we are in a supercycle.”
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino
video transcript
Josh Lipton: That’s interesting, Ray, because investors are clearly very excited about AI. That’s his big theme for 2023, and that excitement clearly helped drive Microsoft’s stock price significantly higher. So you can actually see the investment that Nadella made in Microsoft and what the stock is doing. How wonderful! But I think the question for Apple is, what is their AI story? We hear all these rumors and whispers, but what do you think is coming?
Ray Wang: What’s interesting is that Apple has never explicitly stated that they have an AI strategy, but we’ve all experienced what an ambient experience is like, right? Dim the lights and take a photo. Masu. Suddenly, I looked better. So you’re done with gray sky photos and every photo now looks blue, right? That’s kind of crazy.
So their AI is embedded in the background. They already have a lot of it. It starts at the chip level and goes all the way to the user experience. I think if you want to tell the story of AI, you just need to tell more stories.
Josh Lipton: Don’t you think they’re going to put in the time, effort, and money to build such a feature? Maybe we’re a little bit hoping for a big announcement at the big software show in June. Is it not?
Ray Wang: I don’t know if they will adopt Samsung or not, but the whole world is going with a strategy like the Galaxy AI announced at CES. I think it’s been here forever. And I think people are going to understand what it means to have AI that actually works and, hey, what we’re talking about is AI.
Jared Breichle: Ray, we were talking on the brink, during a break, and you said that CES has become a car show, a car show. There is a lot of work to be done in advancing mobility and AI, but of course AI is integrated in every aspect and needs to be thought about. But how will this be made available to the public? As the Internet of Things becomes integrated into our lives, how will AI become part of everyday objects?
Ray Wang: Well, we’re looking at several aspects. We also see this in the field of energy management. You found it in the ability to help you as an assistant and help you with everything from translation to managing your daily activities. We see it in smart lighting and smart buildings. It’s actually tailored to your needs.
What we’re seeing in health is people quantifying themselves and saying, oh, yeah, is that a heart murmur or is that a heart murmur? Wait, am I allergic to this? Yes, we are starting to think of it as an extension of humanity. Over time, perhaps in 10 to 15 years, we may reach a point where we have better situational awareness.
So now it’s expanding humanity. In the future, it will be important how I train the machine to reach the level of accuracy I want to achieve. And at some point we will reach the full automation that we all dream of. And remember that automation is the only way you want it done, not the way others do it.
Jared Breichle: Just what I dream of, right? yes.
Ray Wang: Yes, we all dream of it.
Josh Lipton: And, Ray, I too would like to bring this profit back to Apple soon. Because you can get immediate profits. A certain tension creeps into the story. We’ve seen a series of downgrades on the street, Ray. Obviously, I think there are concerns from some quarters about poor iPhone sales, especially in China. What do you expect when they report?
Ray Wang: What we’ve seen in the past few quarters is a decline in revenue, but profits are still increasing, so you don’t know. That’s because the equation and rationale for services is really growing, and services are much more profitable than launching hardware. So I think we’ll probably see similar trends. But we’ve done checks on our suppliers, and they’re not that sensitive in the sense that they’re saying, “Hey, we’re going to decline.” That’s mainly because we’re still in a supercycle.
The supercycle that’s going on right now is probably 250 to 260 million more iPhones going to 5G, and we’re going into the 15th and 16th cycles. That’s a lot of iPhones. Moreover, India has not yet strengthened. So even if China shuts down and the Chinese economy gets really, really bad, it’s India that they want to recover from.
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