Apple‘s (AAPL -1.04%) Worldwide Developers Conference (WWDC) last week sparked a new interest in the stock and caused it to notch fresh all-time highs. However, there are a few winners and losers associated with its primary announcement about Apple Intelligence and its general take on artificial intelligence (AI).
So, who are the winners and losers of this conference? The answers may surprise you.
Winner 1: Taiwan Semiconductor Manufacturing
To me, there is a clear winner in this announcement: Taiwan Semiconductor Manufacturing (TSM -0.81%). Taiwan Semi’s business is already doing well, but it just got a catalyst. In 2021, 2022, and 2023, sales from Apple made up 26%, 23%, and 25% of TSMC’s revenue, respectively. The smartphone business has struggled recently, but that could turn around quickly.
Because Apple Intelligence will only be available for iPhone 15 models and newer, it isolates about 90% of iPhone users with an older generation. If Apple Intelligence becomes the latest must-have technology, it could ignite a new demand for iPhones.
With a large chunk of Taiwan Semi’s revenue coming from this business, it would stand to benefit.
Winner 2: Microsoft
Microsoft (MSFT 0.92%) is also a huge beneficiary of this announcement. Because Apple chose to partner with OpenAI (the maker of ChatGPT), it selected the company that Microsoft has heavily invested in. This also validates its use of ChatGPT throughout its Microsoft Office suite, as it will create a fairly seamless experience for the millions of people who use Office products and iPhones daily.
While the plan is for iPhones to run most of these workloads on the smartphones themselves, some of it may have to be outsourced to servers due to the arduous nature of the AI model. When that occurs, it will happen on Microsoft Azure servers because that’s where OpenAI has run its technology. This will also serve as an increased revenue stream for Microsoft.
Loser 1: Alphabet
Alphabet (GOOG 1.44%) (GOOGL 1.89%), Google’s parent company, finds itself on the wrong side. Alphabet’s generative AI model, Gemini, competes with ChatGPT. Apple could have chosen Gemini as the model to run its Apple Intelligence on, as it would have been a logical continuation of its partnership.
This breaks a tradition of Google and Alphabet working together — the Google search engine is the default one on Apple products because Alphabet pays for it. Recently, this was the subject of an antitrust lawsuit, which may have influenced Apple’s decision to choose ChatGPT over Gemini.
Regardless, Gemini isn’t Apple’s pick for its Apple Intelligence, and that’s a lost opportunity for Alphabet.
Loser 2: Apple
My last loser is Apple, which may come as a surprise. Apple will likely see a surge in demand for its iPhones, which will increase sales. But that’s not the point I’m trying to make.
Apple is a massive company with resources few can dream of having. It has armies of software engineers and more than $60 billion in cash and marketable securities on its balance sheet as of the end of its fiscal second quarter (ended March 30). Yet, it couldn’t make its own generative AI model in-house?
This shows how far behind Apple is in the AI race, as it was caught completely off guard. Because of its partnership with an external company, there will always be questions about data security and what information is being shared with other companies. If it kept that in-house, those questions wouldn’t be as relevant.
Instead, this could be the Achilles’ heel of a product that otherwise seems solid. Although Apple will likely see increased sales, the long-term ramifications of not bringing this technology in-house could be problematic for Apple.
