Apple Inc. has dramatically shifted Wall Street's perception of its position in the artificial intelligence race. The company's stock surged to a new all-time high recently, marking a 39% increase since August 1, 2025. This rally comes despite the indefinite delay of its flagship AI project, Apple Intelligence, and a smarter version of Siri, highlighting a growing investor belief in the tech giant's unique, long-term strategy.
The Privacy Handicap and the Siri Conundrum
Apple entered the competitive AI landscape with a self-imposed constraint: an unwavering commitment to user privacy and security. Unlike its peers, Apple views these features as core marketable assets rather than operational costs. This principle has become the central challenge in developing the next-generation Siri, which was intended to rival chatbots from OpenAI and Alphabet.
The company's strong preference is for all machine learning to occur directly on encrypted Apple devices, utilizing special neural processing units within its custom chips. While this offers unparalleled privacy, it creates a significant technical hurdle. The powerful "frontier" language models that fuel services like ChatGPT require massive data centers and are too demanding for a smartphone. Conversely, the smaller models that can run locally on a phone currently fail to meet Apple's high standards for a consistently excellent user experience.
Running a Marathon While Others Sprint
While competitors like Meta Platforms, Microsoft, Google, and Oracle are investing hundreds of billions in capital expenditures for AI data centers—polluting their once-pristine financial statements—Apple is pacing itself. Meta, for instance, is spending around $70 billion on AI data centers this year alone. This spending spree is driving up debt levels and depreciation expenses across Big Tech.
In stark contrast, Apple's depreciation expenses rose just 7% in the latest quarter, compared to 41% at Alphabet, 93% at Microsoft, and 20% at Meta. This fiscal discipline allows Apple to maintain its massive cash-return program for shareholders. The company is on track to push its cumulative dividend payments and share buybacks past the $1 trillion mark, having retired nearly half of its outstanding stock since 2012.
Apple's technical answer to this dilemma is its Private Cloud Compute system. This involves open-source server software, written in Apple's programming language and running on Apple servers equipped with Apple chips. The system is designed to process AI tasks in the cloud while keeping personal data hidden, even from Apple itself. This allows the company to maintain control over its entire technology stack, a cornerstone of its privacy philosophy.
Does Apple Even Need an AI Blockbuster to Sell iPhones?
The situation raises a fundamental question about Apple's business model. In the mature smartphone market, do flashy AI features truly drive sales? Evidence suggests the cycle is more pragmatic. The iPhone 16, heavily marketed as the "Apple Intelligence" phone, saw decent but not blockbuster sales. Now, the iPhone 17 lineup is focusing on traditional strengths like hardware, design, and camera improvements—and early indications are promising.
Analysts project the iPhone 17 will boost device sales growth to its highest level since fiscal year 2021. This uptick may be less about AI and more about natural replacement cycles; the phones purchased during the COVID-19 lockdowns in 2021 are now five years old. Meanwhile, Apple's services revenue continues to grow briskly, powered by its installed base of over 2.3 billion active devices.
Reports indicate Apple is in talks with Alphabet and AI startup Anthropic to use their models as a stopgap, fine-tuned for Apple hardware. This pragmatic approach allows the company to integrate advanced AI features while it continues developing its own high-performance, privacy-compliant models. As Salesforce CEO Marc Benioff noted, AI models are becoming commoditized, with cost often trumping brand loyalty for enterprise customers.
Apple's narrative, as articulated by observers like Adam Levine of Barron's, is one of patience. In a race where most are sprinting toward an uncertain AI future, Apple is running a marathon. The company believes that owning the user experience and the privacy narrative will ultimately provide a more durable advantage than having a temporarily superior AI model. For now, Wall Street and Apple's investors seem content to hold on for that long ride.
