Remember when the iPhone was new and Apple made all nicey nice with Google to get Google maps and navigation featured heavily on the iPhone? That went well for Apple.

Do you remember what they did a few years in? They built their own Map and chipped away at the integration with IOS which Google Maps had initially enjoyed.

Almost as though they realized that even something as tangential to the idea of a Phone as navigating with maps was well into the bailiwick of software-y tech-y things that Apple has so successfully integrated in their own very successful walled garden of technological solutions.

So now Apple is renting some really good AI instead of building their own. What are the chances that Apple doesn't have its own full AI stack in house 5 years from now? Even if they have to buy a few of the companies providing it?

AI is MORE important to Google than was search, if that is possible. AI replaces search, becomes indistinguishable from search, it is not a box to check so wall street doesn't get mad at you.

AI is just as central to the essence of Apple's value proposition. More than any other provider, Apple is vertically integrated, biulding GREAT hardware AND building great software on top of that. There will be nothing tangential about Apple's ultimate use of AI. They are not renting AI because they are financial wizards that realize that houses cost too much to buy. They are renting AI because they screwed up, just like they did with Maps and navigation previously. They know how to fix stuff like that.

I think this whole AI thing makes a lot more sense if you allow for the possibility that the companies that have most successfully deployed tech for 20 years at 20% CAGR have the first clue about what they are doing. Is their lower Free Cash Flow because they are somehow screwing up? Dollars to donunts, that's not what they think. Their reduced FCF is because they have finally found something worth investing in.

Could they be wrong? Of course the future hasn't happened yet so sure, anything is possible. Is betting that they are wrong a good idea? The smartest most successful businesses perhaps in history seem to have a trillion dollars that doesn't think so.

IMHO. YMMV but obviously I don't think it will.

R:)