Can Apple Intelligence live up to its hype?

Several big tech names have provided their latest quarterly results, many reporting higher spending to capitalize on that AI play. Amazon, Microsoft, and Alphabet revealing they spent a total of nearly $51 billion in CapEx. That is up from the $30.5 billion in the same period last year. As for the benefits from all that AI hype, all three companies have seen revenue growth in their cloud businesses, potentially an encouraging sign for big tech. Creative Strategies CEO and Principal Analyst, Ben Beharin, joining us now to discuss all this. Ben, it is always great to see you on the show. I did want to start with Apple, Ben, because you know that company so well. And you know, I was talking to Apple CFO, Luca Maestri, and I asked Luca about the rollout of Apple Intelligence because it's different, right, Ben? It's gradual, and I was trying to ask Luca how he thought that kind of gradual rollout will affect the iPhone upgrade cycle. And what Luca told me was basically it's tough to predict because he said, listen, this is different for us, this kind of gradual rollout. But yes, it could ultimately mean a different kind of cycle. Is that how you're thinking about it, Ben? Yeah, I mean, I think if you look back, and this is a consumer point, I know we're going to talk about enterprise AI in a little bit, but from a consumer standpoint, it's been hard to look back on the history of a couple decades of consumer electronics and really see software itself drive a hardware cycle. It's typically been very hardware driven. And I think that's the hardest comp that many of us are having to make is to really look at how much of a software angle is actually going to drive a hardware cycle when we're kind of, like, that's not really a comp that we've had before. So I think the unpredictability of it is definitely right on. I mean, I do think there's elements of coming. I think Apple Intelligence is the most mature kind of consumer AI implementation at a system level for customers. I think Apple's now got to go market and tell that message and make it clear to consumers why are they going to want to use these features. And that's where I think we just don't feel that pull yet. You know, we're not seeing people line up or have drastic FOMO, right, from hearing what their friends use Apple Intelligence and then they don't have that on our devices. So I think another few quarters are needed for that. So I think they're right in kind of the conservative rollout approach. But again, I sort of go back to we just don't have a fundamental comp where we can see that a software, in this case an operating system integration, actually drives a hardware cycle. Ben, I'm going to get personal on that front for just a second because I have a 15, right, so I don't need to buy a new phone. I put Apple Intelligence on my phone. It's fine. I don't really know what to do with it yet. Like, is there something about it that you think will prove most compelling to users that will then drive that upgrade cycle maybe over the next few quarters? Like, is there something within it that is the killer thing? I think it's really hard to point to. I think you make a very good point. And I also think it's important to note that the vast majority of humans who use this technology, they use smartphones and PCs, are not using any AI on a daily basis. I think we've got all of the hype that we talk about is really about power adopters and early adopters, right? People who are on the front end of that adoption spectrum. You talk to folks, you know, just out on the street, normal consumers, they're not using any of this stuff. So in that regard, Apple's actually relatively early, right? They're in a unique position to onboard and help mature experiences with this software. And that's kind of new, you know? They haven't really been in this category before of taking what we'll consider a bleeding edge technology and start to get people to care when it's really their first experience with it. So I think you're exactly right. This is an onboarding question. It's a, how easy is it to discover and use? These are user interface functions that I think they're up against. And to some degree, just philosophical approaches to how Apple does software. Like I said, I think they've implemented it in a way that should meet its expectations. But I also think, I worry that people are coming from either too high of expectations or really no expectations at all because it's not really a driver for them, right? To go and want to use these devices.