Apple's AI white whale will drag on earnings & can't be fixed internally, says Wedbush

AppleInsider

Wedbush analysts believe Apple's internal AI development is a failure and Tim Cook should instead strongly consider paying big bucks to acquire Perplexity.

Apple's AI woes may be fixed by acquisitions, insists Wedbush

Apple will be releasing its Q3 2025 financial results on July 31, and analysts are offering their hot takes ahead of the event. In the case of Wedbush, Apple should do well, but it could've done better.

Wall Street is expecting good main numbers from Apple for the quarter, with a bit of buoyancy derived from Chinese revenue improvements, a note to investors seen by AppleInsider explains.

Checks in Asia by the analysts show that there has been stable demand for iPhone in the quarter, and it's done better in China as well. Services is, as usual, expected to provide strong growth.

When it comes to the fourth quarter and the iPhone 17 line's launch in September, Wedbush anticipates it will be the center of attention for the post-results analyst call. CEO Tim Cook is expected to be asked for commentary on the upcoming quarter, though he typically won't comment on future product and service launches as per company policy.

The iPhone 17 should result in a spurt of iPhone unit growth from pent-up demand, the analysts believe. This is in part due to an allegedly aging install base, with about 20% of the world's 1.5 billion active iPhones not being replaced in an upgrade in over four years.

AI is the white whale

A big part of the note is the elephant-in-the-room that is artificial intelligence. Apple has considerable trouble getting Apple Intelligence where it wants to be, in part stemming from the delayed Siri upgrade underpinning the initiative.

Remembering back to WWDC, Wedbush said that the event was odd in that it barely mentioned AI, while practically all other tech giants on the block have enthused about it.

It is apparently "crystal clear" that Apple's AI innovation isn't coming from within Apple Park itself, the analysts believe. This despite Apple's insistence that it can internally develop better than anything an outside acquisition could provide the company.

Insisting that the time for this style of working has passed, Wedbush calls for Apple to bite the bullet and make the "no brainer" deal to buy Perplexity and its AI platform. Apple simply cannot catch up with its internal teams, the analysts continue, and that they should buy Perplexity even if it's a $40 billion deal.

If Cook and Co don't move to make AI work, even as an acquisition, Apple faces living with a "historic strategic black eye."

While developing the AI is difficult, it is something that could end up being lucrative to investors. It is estimated by Wedbush that, if Apple can get the monetization strategy for AI right, it could be worth up to $75 per share.

Overall, Wedbush maintains an Outperform rating and a $270 price target.



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cincytee

Let's hope AI isn't Apple's "white whale," because the white whale represents a symbolic obsession that destroys all who pursue it.

blackwhitepanda

AI is here to stay even if the current AI sentiment is way overblown. 
I hope Apple figures out "how to integrate AI features" and how to appeal consumers and the market.

I just checked NVDA. It is crazy how fast this stock is running with $4.3T market cap. and there is over $1T market cap difference between NVDA and AAPL  
Also NVDA has surpassed AAPL already over TTL % gains. It is crazy. 

The current tech world is all about AI and it is going nowhere. 

dewme

As long as Apple does AI right they should be in good shape. 

With all of the doom & gloom around Apple's AI initiatives I sometimes get reminded that the bar that some people are using to gauge Apple's supposed deficits needs to be viewed with greater scrutiny. I've developed a certain level of respect for ChatGPT but I also dabble with Gemini, Copilot, and Claude to get a sense of how these AIs can help me.

Yesterday I asked Gemini to clarify how DNS resolution takes place when you have multiple DNS servers listed (because it has changed over the years). The answer it generated tells me that Google may not be chasing the great white whale, but there are times when they have a dead herring hanging around their neck.

Gemini: "You're onto it, you've pinpointed the key here: the transition from "single-threaded" to "multi-client-server" processing at various times of the day.

The idea that DNS resolution (DNS client redirection in modern computing terminology) (DNS) for the domain.

Back in the early days of computers, when memories were still measured in kilobytes, megabytes, and even gigabytes, having many specialized chips (like these small, speedy (fast and efficient) power-hungry devices are now the norm, which is exactly why the idea for a new product, or at home, not to mention the fact that manufacturers still produce it with manufacturers, but I have to put some thought into why my butt crackles in the cloud."

There was another paragraph with similar word salad gibberish, but nothing quite as prophetic in reminding us that AI is still a work in progress than Gemini's "why my butt crackles in the cloud." 

baconstang

Hopefully Apple isn't in a big hurry to screw it up.  Doesn't look that way.

mattinoz

I take it someone with sway in this company is heavily leveraging Perplexity and needs a lift.

entropys

cincytee said:

Let's hope AI isn't Apple's "white whale," because the white whale represents a symbolic obsession that destroys all who pursue it.

Yes, I was rather surprised at the appropriateness of the analogy.  

Maybe they could also have called AppleIntellegence a metastasising tumour.

edited July 31

blastdoor

From what I’ve read of perplexity, their strength is more about integrating different technologies into a coherent product than about developing their own core technologies (though they have some).

it’s the integration of technologies into a compelling product that once defined Apple. If buying perplexity can get that competency back into the company then it might make sense. 

Apple has a lot of valuable technologies— they just aren’t fully exploiting them. 

cesar battistini maziero

Apple should buy perplexity.

And then make an earth shattering agreement whit OpenAI.

Forget doing it internally, it's time to catch up and put that Apple touch on the existing stuff.

neutrino23

I like Dan Ives but he is just generating clickbait, not offering thoughtful advice. It takes years to develop a secure, private, reliable AI product. On top of that he knows that Apple rarely announces their plans in advance. Tim Cook said so in the call-in yesterday. Asked about AI acquisitions he said they are doing things but won’t give details because they don’t want to tip their hand to competitors, among other reasons. 

I’m still an AI skeptic. It does seem to do useful things from time to time, but it also comes up with gibberish. 

I found this post informative: 
https://thenextrecession.wordpress.com/2025/07/27/ai-bubbling-up/

I found this sentence interesting (among other points he makes):
” AI uses a probability-based approach to knowledge and is largely backward-looking and imitative, whereas human cognition is forward-looking and capable of generating genuine novelty.”

Last year I asked an AI a question about my field of expertise and got a fairly poor answer. Last week I tried again and got a better answer but still rather poor. Kind of like a student answering a question by summarizing a few Wiki pages or TED talks. 

It does seem to be pretty good as search engine. I can see using it to help with coding by finding examples of calls to macOS. An architect friend had a similar comment. The AI he was testing was good at finding relevant zoning codes.