Despite near-unlimited capital and distribution, Apple's most impressive innovation in the last decade has been a thinner iPhone. This is viewed as a major failure of vision and a massive missed opportunity for a company positioned to lead in new technological frontiers.

Companies like Apple condition shareholders to expect steady profits and buybacks. This creates a trap, making it difficult to pivot to heavy, profit-reducing investments (like major AI CapEx) that shareholders of growth-stage firms tolerate.

The young Steve Jobs famously vilified IBM in the iconic "1984" ad. However, upon returning to a failing Apple, the older Jobs recognized his own operational weaknesses. He hired a wave of talent from IBM, including Tim Cook, to instill the discipline in logistics, procurement, and manufacturing that he had previously disdained.

Apple's inability to ship its own cutting-edge AI model has paradoxically become a strategic advantage. Instead of bearing the immense cost of foundation model development, they can now integrate best-in-class third-party models onto their dominant hardware ecosystem, a position Mark Gurman calls 'falling ass backwards into it.'

Despite record-breaking revenue, Apple's stock is flat because the market is focused on its long-term AI strategy. The company's capital expenditure on AI infrastructure is dwarfed by competitors like Meta and Google, signaling a potential inability to own its technological destiny in an AI-dominated future.

While competitors spend billions on data centers, Apple's focus on powerful on-device chips cleverly offloads the enormous cost of AI compute directly to consumers. Customers pay a premium for new devices capable of local inference, creating a massively profitable and defensible AI business model for Apple.

Thompson critiques Apple's lucrative services strategy as a shift from creating the best products to "harvesting the profits from other companies' innovations." The argument is that this rent-seeking behavior is corrosive to the company's core DNA of product excellence and innovation.

Rumored next CEO John Ternus is known for maintaining existing products, not developing new ones. This suggests Apple may prioritize operational stability and market dominance over the disruptive, visionary leadership embodied by Steve Jobs, signaling a strategic shift for the company's next chapter.

Apple is successfully navigating the AI race by avoiding the massive expense of building foundational models. Instead, it's partnering with companies like Google for AI capabilities while focusing on its core strength: selling high-margin hardware. This allows Apple to capture the end-user without the costly infrastructure build-out of its rivals.