Apple said on Monday that the artificial intelligence models underpinning Apple Intelligence, its AI system, were pretrained on processors designed by Google. This is a sign that Big Tech companies are looking for alternatives to Nvidia when it comes to the training of cutting-edge AI.

Apple AI models trained on Google

Apple’s choice of Google’s homegrown Tensor Processing Unit (TPU) for training was detailed in a technical paper just published by the company. Separately, Apple released a preview version of Apple Intelligence for some devices on Monday.

Apple AI training without Nvidia

Nvidia’s pricey graphics processing units (GPUs) dominate the market for high-end AI training chips, and have been in such high demand over the past couple years that they’ve been difficult to procure in the required quantities. OpenAI, Microsoft, and Anthropic are all using Nvidia’s GPUs for their models, while other tech companies, including Google, Meta, Oracle and Tesla are snapping them up to build out their AI systems and offerings.

Apple’s decision to rely on Google’s cloud infrastructure is notable because Nvidia produces the most sought-after AI processors. Including the chips made by Google, Amazon.com and other cloud computing companies, Nvidia commands roughly 80% of the market.

Companies overinvesting in AI infrastructure

Meta CEO Mark Zuckerberg and Alphabet CEO Sundar Pichai both made comments last week suggesting that their companies and others in the industry may be overinvesting in AI infrastructure, but acknowledged the business risk of doing otherwise was too high.

“The downside of being behind is that you’re out of position for like the most important technology for the next 10 to 15 years,” Zuckerberg said on a podcast with Bloomberg’s Emily Chang.

Apple using Google chips for AI

Apple doesn’t name Google or Nvidia in its 47-page paper, but did note its Apple Foundation Model (AFM) and AFM server are trained on “Cloud TPU clusters.” That means Apple rented servers from a cloud provider to perform the calculations.

“This system allows us to train the AFM models efficiently and scalably, including AFM-on-device, AFM-server, and larger models,” Apple said in the paper.

Apple said that to train its AI models, it used two flavors of Google’s tensor processing unit (TPU) that are organized in large clusters of chips. To build the AI model that will operate on iPhones and other devices, Apple used 2,048 of the TPUv5p chips. For its server AI model, Apple deployed 8,192 TPUv4 processors

Representatives for Apple and Google didn’t respond to requests for comment.

Apple Intelligence system

Apple was later to reveal its AI plans than many of its peers, which loudly embraced generative AI soon after OpenAI’s launch of ChatGPT in late 2022. On Monday, Apple introduced Apple Intelligence. The system includes several new features, such as a refreshed look for Siri, better natural language processing and AI-generated summaries in text fields.

Over the next year, Apple plans to roll out functions based on generative AI, including image generation, emoji generation and a powered-up Siri that can access the user’s personal information and take actions inside of apps.

This is the second technical paper about Apple’s AI system, after a more general version was published in June. Apple said at the time that it was using TPUs as it developed its AI models.

Apple is scheduled to report quarterly results after the close of trading on Thursday.

Stock update

Apple share price was up at $218.24 but at closing it fell to $217.19. Nvidia share price closed at $110.77 down 0.73%. Google share price was up at $171.13 today but closed lower at $169.73.

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In what was seen as a move to catch up with Alphabet’s Google and Microsoft-backed OpenAI, the iPad maker last month unveiled Apple Intelligence, luring customers to upgrade their devices to be able to use the new technology.

Apple stock rally

Apple’s share price, which have jumped nearly 20% this year, rose to $236.30, giving the company a market value of $3.62 trillion, the highest in the world.

“Apple Intelligence is a clear catalyst to boost iPhone and iPad shipments,” Morgan Stanley analysts said.

AI technology to iPhone boost

The new technology is compatible with only 8% of iPhone and iPad devices and Apple has 1.3 billion units of smartphones currently in use by customers, the analysts said. Th analyst added that the company could sell nearly 500 million iPhones over the next two years.

Global smartphone market recovery

Industry analysts expect Samsung and Apple to lead the charge in global smartphone market recovery this year given the buzz around GenAI-enabled smartphones.

About 45.2 million smartphones were sold globally by Apple in the three months ending June, up from 44.5 million a year earlier. But its market share fell to 15.8% from 16.6% in the same period, according to IDC data.

Apple share price target

Apple share price, which have jumped nearly 20% this year, rose to $236.30. This gave the company a market value of $3.62 trillion, the highest in the world.

Morgan Stanley, which previously expected Apple to sell between 230 million and 235 million iPhones annually over the next two years, raised its price target on the company’s shares to $273 from $216.

The stock has an average rating of “buy” with a median price target of $217. It has outperformed the S&P 500 index (.SPX), opens new tab this year, according to LSEG data.

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The Apple AI features to boost sales, included an overhaul of its voice assistant Siri, integration with OpenAI’s ChatGPT, a range of writing assistance tools and new emojis that can be customized. The company pitched the features as AI for the average person, though users will likely need to upgrade their iPhones to access the tools.

Apple stock climb a record high

The rally comes as a breather for the stock, that has underperformed versus the benchmark S&P 500 this year, as Apple grapples with weak sales for its premium consumer gadgets.

With Tuesday’s share price rise, Apple bested its previous record from Dec 14. The company’s developer conference came as a welcome sign for investors who have been watching to see how Apple will capitalize on the ongoing AI boom.

Analysts from Morgan Stanley said Apple’s AI features strongly position the company with “the most differentiated consumer digital agent.” Additionally, the analysts believe that the features will drive consumers to upgrade their iPhones, which should “accelerate device replacement cycles.”

Apple’s valuation

Apple stands to add $180 billion to its market valuation if the current stock price of $205 holds.

At $3.15 trillion, Apple’s market valuation is just $40 billion shy of Microsoft’s, the world’s most valuable company. Nvidia, the largest benefactor of a boom in AI applications and number three in terms of market valuation, is at $2.93 trillion.

AI can boost sales for Apple

As per the analysts Apple will still have to deliver when the AI features are first available in the fall, but they think the “building blocks are in place for a return to growth and more sustained outperformance.”

“Following a WWDC that delivered on the key details we were focused on heading into the event, we have even greater conviction that Apple is on the cusp of a multi-year product refresh that underpins our OW rating, $216 price target, and $270 bull case valuation,” the analysts wrote in a note Tuesday.

Bank of America analysts were also optimistic about Apple’s announcements, saying the features will lead to “an upgrade cycle for AI-enabled IntelliPhones.” The analysts maintained their buy rating on the stock due to the promise of a multiyear upgrade cycle, potential for gross margin upside and services growth.

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Apple market capitalization hit a historic $1 trillion dollar value last week after the America tech giant announced its better-than-expected fiscal third-quarter earnings that surged its share price, making Apple the world’s first trillion-dollar public company. Since Tim Cook assumed office as the Apple’s CEO following Job’s retirement in 2011, Apple share price has had a fourfold growth. The stock was up by 0.2 percent as of Saturday, closing at $207.99 – 94 cents more than it was on Thursday when it pushed Apple past the landmark valuation.

It’s barely 48 years ago that the entire United States stock market capitalization hit $1 trillion, the worth of a single company today. Meanwhile, US steel became the first billion-dollar public company 117 years ago. Maybe the new age has seen firms gain more trust from investors. With the historic market value, Apple’s stock is now worth more than the economies of Switzerland and Turkey, and as well as one-third of the UK economy, just after 42 years of existence.

How Apple became the world’s first trillion-dollar public company

Founded in 1976 to sell personal computers, Apple’s success has gone beyond premium Smartphone supplies to also hold strong shares in the market for smartWatch (iWatch), tablet computer (iPad), portable media player (iPod), smart speaker (HomePod), etc. The company’s services are exclusive for its product’s ecosystem, iOS which is yet to have a kind, with the closest rival Android subject for “forked” version as an open source ecosystem.

The valuation is official

In 2007, PetroChina was cited to have hit trillion-dollar valuation after its flotation, but the value is considered unrealistic since only 2 percent of the company’s stock is open for public trading. The same unofficial valuation goes to Saudi Aramco, valued to worth up to $2 trillion but the values are yet to observe public scrutiny.

Apple’s roadmap to the historic milestone powered by the company’s rise in share was closely monitored. The trigger came after the company’s quarterly financial results announced early last week were found to be better than Wall Street expectations. The Cupertino, California-based Apple racked up $11.5 billion worth of profits within three months from a record sale of $53.3 billion, growing the company’s stock price while offering a swift cruise of its value from $935 billion to win the priciest horse race of all time among giant companies, $1 trillion market capitalization.

Apple racked a total profit of $48.5 billion last year, and now has cash reserves worth $285 billion. Its strong market performance in recent times has jiggled technology rivals especially competitors in the race to break the $1 trillion mark, such as Google with a market cap of $864.05 last month, Amazon and Microsoft. Apple’s last earnings report is in contrast to those of Facebook, which suffered a massive loss, more than $120 billion the previous week after a 20% fall of its share price.

The milestone is not actually a surprise to many. Apple prides 14 percent market share in the US and 3 percent in the world. Its mark in the technology industry is a deeply felt one that would take an eternity to break in our time.

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