Apple is well-positioned as DeepSeek threatens AI giants, analysts say
Apple could benefit from China's DeepSeek, which appears to deliver cheaper AI models. Its competitors have already spent big on their own efforts.
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- China's DeepSeek has roiled tech markets.
- Apple's stock, however, rose on Monday while competitors like Alphabet and Microsoft dropped.
- Apple's AI strategy focuses on integration, not cutting-edge model development, analysts said.
Big Tech is reeling from the seemingly sudden popularity of a big new Chinese AI name, but Apple could benefit from a disruption to its competitors' efforts.
DeepSeek, a Chinese artificial intelligence startup, released the AI model R1 on January 20. Many in the tech industry believe DeepSeek's large language models could threaten some of the biggest AI players, including Google, Microsoft, and OpenAI.
DeepSeek has spooked markets because it appears to deliver models that are as effective as US versions but much cheaper to produce because they run on less powerful chips.
That undercuts Google, OpenAI, and others' ability to charge premium prices to access the best of their AI models. The Netherlands-based chipmaker ASML's shares fell by 7%, while the AI chip giant Nvidia's stock dropped by more than 17% on Monday.
Apple, however, is in a relatively good position, tech analysts told Business Insider. Its stock rose on Monday, while competitors Alphabet and Microsoft traded down.
"Apple would be a beneficiary if the cost of AI training declined," Gene Munster, the managing partner at Deepwater Asset Management, said.
One reason Apple stands to gain from cheaper AI training is that it "rightly focuses on how to integrate AI as a product, rather than building the most cutting-edge models," William Kerwin, a tech analyst at Morningstar, said.
Apple could integrate LLMs and improve Apple Intelligence at a cheaper rate than competitors and ultimately keep costs down for consumers, Kerwin said.
If DeepSeek proves that powerful AI capabilities are achievable for a fraction of what most AI companies are spending, it could "benefit Apple by leveling the playing field and allowing it to accelerate AI integration plans without making excessive capital expenditures," Jacob Bourne, an analyst at BI's sister company EMARKETER, said.
Apple has been criticized for being slow to put out its AI offerings. It released Apple Intelligence software last year, months after its Big Tech competitors launched their versions and years after OpenAI launched ChatGPT.
By spending less on AI infrastructure, Bourne said, Apple has some insulation from the fallout its US competitors are facing.
Apple didn't immediately respond to a request for comment from Business Insider.
Tech leaders like Alphabet CEO Sundar Pichai and Meta's Mark Zuckerberg have maintained that investing heavily in AI is worth the risk — Meta is expected to invest over $60 billion in AI infrastructure in 2025.
Apple's AI spending appears to be lower than that. Although the iPhone maker hasn't disclosed exactly what it spent on AI in 2024, it reported $45.6 billion in payments for property, plant, and equipment in the fiscal year — up from $43.7 billion in 2023. Those costs would likely include more than just AI spending.
