Apple’s big Siri update is here. Now the real challenge begins

Apple has unveiled a significant artificial intelligence upgrade for its long-standing digital assistant, Siri. Dubbed Siri AI, the revamped assistant aims to bring Apple's AI capabilities in line with competitors like OpenAI's ChatGPT and Google's Gemini. The company announced that the new assistant, set to launch in beta later this year, will be capable of operating apps, analyzing an iPhone's screen to provide answers, and integrating personal context into its responses.

This move comes as Apple faces mounting pressure to demonstrate a robust AI strategy after perceived lags in the AI race over the past few years. Investors and analysts are closely watching to see if Apple can leverage this AI advancement to drive future iPhone upgrades, increase revenue from its services, and potentially power new product categories. A key question for the market is whether Apple, known for transforming nascent technologies into mainstream successes, can successfully monetize its AI offerings.

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Updates felt more evolutionary vs revolutionary, and we continue to view (Apple) as a laggard in AI with no killer apps and a questionable monetization strategy.

However, skepticism remains among financial analysts. Barclays analysts noted in a research report that Apple's updates felt more "evolutionary vs revolutionary," and they continue to view the company as a "laggard in AI with no killer apps and a questionable monetization strategy." While Apple's strong iPhone sales have shielded it from some of the valuation concerns facing other AI companies like OpenAI and Anthropic, analysts are still seeking concrete signs that its AI ambitions will translate into increased iPhone sales or iCloud+ subscriptions. Morgan Stanley analysts acknowledged that Apple has provided "clearer paths to monetizing AI," but cautioned that the advancements represent a "marathon, not a sprint."

Furthermore, the reach of Apple Intelligence is limited. While available on newer models like the iPhone 15 Pro, estimates suggest that more than half of existing iPhones do not support the new AI features. Even if users upgrade their devices this fall, the primary drivers are likely to be battery life or performance improvements rather than AI capabilities. "I don’t think (AI is) driving upgrade cycles in the way that manufacturers were hoping that it would," commented Paul Schell, a senior analyst at ABI Research. Despite these challenges, Apple's announcements offer a glimpse into how AI features could potentially entice consumers toward higher-priced iPhones and subscription services.

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I don’t think (AI is) driving upgrade cycles in the way that manufacturers were hoping that it would.