The keypoint from Apple WWDC 24 keynote
Recently, Apple announced Apple Intelligence. The reactions were mixed, ranging from disappointment to amazement. Apple revealed that it operates in a hybrid mode using both on-device processing and cloud-based AI. Among the many keynote announcements, one particular point stood out to me: Apple has built its private cloud compute system for Apple Intelligence using Apple Silicon which is apple in-house semiconductors. This is significant because Apple is the first in the LLM industry to build a generative AI server cloud without using Nvidia chips. Currently, Tesla has a contract to purchase AI chips worth $3-4B from Nvidia, such as the H100. In this context, Apple is the only big tech company in the US to establish generative AI infrastructure with its own AI chips. While the functionality may not differ much from Samsung Galaxy phones, the server cloud architecture includes technology that Samsung cannot match.
Whoever dominates the AI infrastructure will dominate the world.
If Apple opens its generative AI cloud infrastructure using Apple Silicon chips to developers, I believe it will spur explosive growth comparable to Nvidia. This potential arises from Apple and Nvidia almost monopolizing TSMC's production capacity. Other big tech companies and competitors aspiring to fabless manufacturing cannot commission TSMC for semiconductor production due to capacity constraints. Consequently, American big tech companies are compelled to purchase expensive Nvidia chips. Currently, Apple and Nvidia occupy about 35-40% of TSMC's production capacity, and I believe they nearly monopolize the 3nm production line. This monopoly means that only Apple and Nvidia can build generative AI infrastructure. I believe that Nvidia's current stock price surge is due to this monopolization of TSMC's production capacity. The exorbitant prices of Nvidia's AI chips and their over 70% operating profit stem from their monopolistic status with TSMC.
Apple silicon will dominate in the AI infrastructure
If Apple were to release its generative AI infrastructure as a cloud service, it would be a game-changer. The only big tech stock I own is Apple. My decision to invest in Apple stock was influenced by news of their multi years-long R&D into data center technology using Apple Silicon. I do think Nvidia's biggest rival is expected to be Apple. Apple is the only company capable of vertical integration by combining its in-house semiconductor design capabilities, its near-monopoly on TSMC capacity, and its own software and OS. The highlight of this year's WWDC 24 keynote is Apple's pioneering generative AI cloud infrastructure built with Apple Silicon instead of Nvidia chips. If this technology becomes available as a service to ordinary Apple app developers, it could significantly disrupt the AI infrastructure industry. Let's watch closely to see if such a service will be released. In the coming days, more WWDC developer videos will be posted, and I plan to thoroughly check for any announcements regarding new technologies or SDKs.
