Apple bucked the sell-off in technology stocks on Monday, and rose 3.18%, even as fears spread over the implications of China's DeepSeek R1 large language model and what it could do for artificial intelligence-related spending.
Unlike its big cap brethren, Apple has not spent significant sums of money on AI, choosing instead to rely on partners, such as OpenAI.
Former CFO Luca Maestri said on the company's 2024 second-quarter earnings call that Apple has its own data center capacity, and it also uses some from third parties.
“It's a model that has worked well for us historically, and we plan to continue along the same lines going forward,” Maestri said in response to a question about capital expenditure spending.
In contrast, Microsoft (MSFT) said earlier this month that it would spend $80B on data centers in 2025, with most of the spending occurring domestically. And just last week, Meta Platforms (META) Chief Executive Mark Zuckerberg said his company would spend between $60B and $65B in 2025 to build out AI infrastructure, above the roughly $50B that analysts had expected.
Bank of America analyst Wamsi Mohan said if DeepSeek does indeed lower the cost of AI, then edge applications would see the most benefit and in theory, benefit smartphone makers and PC makers.
"We view Apple as the ultimate play on having an [large language model] in your pocket," Mohan wrote. "As costs become lower, the benefits of having instant access to high quality information that can be integrated first in your smartphone and ultimately into AR glasses (that can benefit from smaller/faster/cheaper models), we see Apple as a key beneficiary of AI over the long term." Mohan has a Buy rating and $253 price target on Apple.
Apple is set to report fiscal first-quarter results after the close of trading on Thursday. A consensus of analysts expect the iPhone maker to earn $2.35 per share on $124.04B in revenue.
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