Unlike competitors feeling pressure to build proprietary AI foundation models, Apple can simply partner with providers like Google. This reveals Apple's true moat isn't the model itself but its massive hardware distribution network, giving it leverage to integrate best-in-class AI without the high cost of in-house development.

Apple is deliberately avoiding the massive, capital-intensive data center build-out pursued by its rivals. The company is betting that a more measured approach, relying on partners and on-device processing, will appear strategically brilliant as the market questions the sustainability of the AI infrastructure gold rush.

Apple isn't trying to build the next frontier AI model. Instead, their strategy is to become the primary distribution channel by compressing and running competitors' state-of-the-art models directly on devices. This play leverages their hardware ecosystem to offer superior privacy and performance.

Apple is letting rivals like Google spend billions on building AI infrastructure. Apple's plan is to then license the winning large language models for cheap and integrate them into its massive ecosystem of 2.5 billion devices, leveraging its distribution power without the immense capital expenditure.

Apple is avoiding massive capital expenditure on building its own LLMs. By partnering with a leader like Google for the underlying tech (e.g., Gemini for Siri), Apple can focus on its core strength: productizing and integrating technology into a superior user experience, which may be the more profitable long-term play.

By licensing Google's Gemini model, Apple avoids the messy and potentially brand-damaging process of training large AI models on vast datasets. This "privacy washing" allows them to deliver competitive AI features while outsourcing the associated privacy risks and controversies to Google, preserving their carefully crafted image.

Unlike search, where Apple charges Google $20B for access, Apple is reportedly paying to use Google's Gemini AI. This reversal shows that elite AI technology currently holds more leverage than even Apple's massive user base.

While critics say Apple "missed AI," its strategy of partnering with Google for Gemini is a masterstroke. Apple avoids billions in CapEx, sidesteps brand-damaging AI controversies, and maintains control over the lucrative user interface, positioning itself to win the "agent of commerce" war.

Apple's internal AI software, including Siri, has faced significant delays. The strategic partnership to use Google's Gemini model has given Apple the confidence to accelerate its AI hardware roadmap, like the new wearable pin, by decoupling hardware innovation from its slower internal software development.