Apple’s promised AI plan is ‘all that matters’, analysts say, as it tries to play catch up with Big Tech rivals

In the year and a half since OpenAI introduced the game-changing large language model ChatGPT, investors have pressured all the Big Tech companies to prove they can keep up. Most tech giants have responded by announcing a series of AI-related initiatives—to a mixed reception on Wall Street.

Last week, Microsoft gained $54 billion in value on the strong performance of its cloud business, which is growing quickly partly thanks to the AI-frenzy of its business customers. In contrast, Facebook-parent Meta has gone on a spending spree to build data centers and buy servers to prepare for an AI-centric world, causing its shares to tank and shaving more than $130 billion from its market value.

But there’s one company—Apple—that has left investors impatiently waiting for details about its AI efforts. And all signs point to the company making them wait a little longer as it prepares to announce its fiscal second quarter earnings on Thursday.

Apple has yet to unveil any AI initiatives on par with the ambition of its rivals—such as Meta’s open-sourced large language model, Microsoft’s workplace assistant, Google’s integration of AI into its search, and Amazon’s service to build customized large language models for businesses based on existing ones. During recent earnings calls, Apple’s executives have repeatedly dodged questions on the matter, with CEO Tim Cook saying during the company’s most recent earnings call in February that he prefers “not to get out in front of ourselves.”

During the call, Cook hinted at a big AI-related announcement later this year. But shareholders shouldn’t get their hopes up this week about any new, significant AI products. Analysts from at least five investment banks and research firms don’t expect any big news until Apple's Worldwide Developers Conference in June, according to their research notes. And the actual roll out of any new products to customers may not come until months later in the fall, according to equity research company CFRA.

“All that matters this year is clarity on Generative AI initiatives,” CFRA analysts wrote, adding that it expects Apple’s June conference to be its most important event in years. Apple “has historically been slow to adapt to changes, but times have changed, and management needs to realize that the company needs to react quicker in a world that is being disrupted by GenAI.”

The lack of an AI plan has factored into Apple’s poor stock performance this year. So far, its shares are down 8% since the beginning of January, trading Tuesday at $170 per share, versus the Nasdaq, which is up 5% over the same time period.

Analysts have made a variety of predictions about what Apple’s expected big announcements may be. Many predict that some of the news will be focused on iPhone 16, which is expected to debut in September.

Goldman Sachs envisions a version of the digital assistant Siri that uses a large language model to better understand what’s happening on a device screen to answer prompts more effectively than it does now, analysts said in an April 12 report. Other potential AI features include predictive text for iMessage, photo and video editing tools, AI-generated playlists for Apple Music that align more specifically to individual users’ tastes, and a tool that summarizes audio recordings and that is different from the one that already transcribes voicemails, according to Goldman Sachs.

An AI-powered iPhone 16 could be exactly what Apple needs to shake up its phone business after months of sales declines due to decreasing demand in China, investment firm Wedbush Securities said in a research note on Tuesday. As competition between U.S. and Chinese tech companies heats up—particularly around the microchips necessary for AI—Chinese consumers have turned away from the iPhone and towards domestic alternatives.

Last quarter, Apple’s total sales in Greater China, which includes China, Hong Kong, and Taiwan, tumbled 13% year over year. Analysts will have their eye on China sales on Thursday, with CFRA expecting the “performance to be ugly,” it said in its research note.

Wealth management firm Baird shared a different vision for Apple’s AI. It expects the company to premiere a better search engine that could compete with Google, analysts said in a February 14 note. Google has dominated the search space for more than two decades, but its leadership has been challenged by the prospect of large language models replacing traditional search. OpenAI is reportedly developing a search product to take on Google, and Baird said not to count Apple out of the search race either.

Whatever its AI ambitions are, Apple will be on the hook for the high costs that come with AI infrastructure, including chips and data centers. Those costs kicked Meta hard during its earnings last week, after the company said AI-related capital expenditures could reach $40 billion this year and continue increasing for years in the future. Meta’s stock price plummeted 17% in the hours following the announcement. Meanwhile, Google-parent Alphabet doubled its capital expenditures last quarter to $12 billion from the year-ago quarter but evaded a stock plunge by pacifying investors with a dividend and buyback program.

Apple typically spends $10 billion on capital expenditures each year, and it has increased spending on AI servers recently, according to Goldman research. To ease the pain, Goldman and CFRA expect Apple on Thursday to raise its existing dividend and issue a buyback—one in a long list—of more than $90 billion.

This story was originally featured on Fortune.com