Why AI Is a Risk to Apple’s Way of Doing Things

Summary

WSJ Tech News Briefing: Why AI Is a Risk to Apple’s Way of Doing Things

Release Date: August 15, 2025
Host: Peter Ciampelli, The Wall Street Journal

In this episode of the WSJ Tech News Briefing, host Peter Ciampelli delves into two major topics affecting the tech industry: the transformation of tech giants into infrastructure behemoths and the unique challenges Apple faces in the rapidly evolving artificial intelligence (AI) landscape. The discussion features insights from Wall Street Journal columnists Christopher Mims and Tim Higgins, offering a comprehensive analysis of current trends and future implications.

Tech Giants Transitioning into Infrastructure Titans

Christopher Mims, co-host of the Bold Names podcast and a columnist at The Wall Street Journal, provides an in-depth examination of how leading tech companies are shifting their investment focus from software development to building substantial physical infrastructures.

Massive Capital Expenditures on Physical Assets

At [01:43], Mims explains the paradigm shift:

“We’re entering what I call this age of infrastructure where like in the days when you had Carnegie and Rockefeller controlling the rails and coal and steel, in some ways, the big differentiator for these companies is they own the infrastructure, they own the rails that the Internet is running on.”

He highlights that the Magnificent Seven tech firms have collectively spent $102.5 billion on capital expenditures in recent quarters, primarily on real estate, data centers, microchips, cooling systems, and energy to support AI advancements.

Global Investment Patterns and Potential Overextension

Mims points out that this surge in infrastructure spending is not limited to the United States. [03:57]:

“China has become such a big spender on AI data centers that the President of China, Xi Jinping, has said, I think probably we're overspending.”

Similar trends are observed in the Middle East, where substantial investments in energy and data centers signify a strategic shift to diversify away from oil-based wealth. Mims notes a sense of Fear of Missing Out (FOMO) driving companies like Amazon, Google, and Meta to over-invest in infrastructure despite potential risks of overbuilding in a possibly frothy market.

Apple's Privacy-Centric Approach in the AI Race

Tim Higgins, another Wall Street Journal columnist and co-host of Bold Names, discusses Apple’s distinctive stance on AI development, particularly its unwavering commitment to user privacy, which contrasts sharply with competitors like OpenAI and Meta.

Apple's Privacy Ethos and AI Development

At [06:14], Higgins elaborates on Apple's foundational principles:

“Tim Cook has really made a big effort and a really big brand positioning that Apple protects that data. It doesn’t use data that the user hasn't agreed to allow that.”

Apple’s approach involves keeping much of the user data on the device or within encrypted cloud spaces, limiting the amount of data available for AI enhancement. This strategy inherently restricts the personalization capabilities of Apple’s AI offerings, such as Apple Intelligence and Siri, compared to rivals who harness extensive user data to refine their AI models.

Competitive Limitations and Future Prospects

Higgins highlights the competitive challenges Apple faces in matching the AI prowess of companies that utilize vast data for personalization. At [07:30], he states:

“We see Meta Platforms CEO Mark Zuckerberg talking about how smart glasses are the perfect device... They are gobbling up that data to make your AI experience that much more personal.”

While OpenAI and Meta envision AI integrated into future personal devices that continuously collect user data, Apple’s privacy-focused model may limit the AI’s ability to offer similarly personalized and interactive experiences.

Market and Investor Reactions

The market response to Apple’s AI strategy has been mixed. At [09:09], Higgins remarks:

“There’s a general kind of consensus among some investors that Apple is behind in AI... There are some who are optimistic in Apple's approach, the idea that they can differentiate themselves in a world where AI is everywhere.”

Investors are divided, with some viewing Apple’s cautious, privacy-centric approach as a potential competitive disadvantage, while others believe it will reinforce Apple's brand loyalty and trust in an era dominated by AI.

Current AI Offerings and Future Developments

Apple has begun integrating AI features that emphasize privacy, such as on-device processing and encrypted cloud systems. However, Higgins notes that Apple is still developing its AI capabilities:

“They’re not quite there yet. One of the things that Apple has tried to do with its AI efforts in the past year or so is offer systems that offer what they say are private.”

Apple’s collaboration with OpenAI to enhance chat features represents a step towards more integrated AI services, albeit within the constraints of Apple’s privacy framework.

Conclusion

This episode of WSJ Tech News Briefing underscores a significant transformation in the tech industry, with major firms heavily investing in physical infrastructure to support AI advancements. Simultaneously, Apple’s steadfast commitment to user privacy presents both challenges and opportunities as it navigates the competitive AI landscape. As AI continues to evolve, the balance between data utilization and privacy will remain a critical factor shaping the strategies and success of leading technology companies.

Notable Quotes:

• Christopher Mims [01:43]: “We’re entering what I call this age of infrastructure where... the big differentiator for these companies is they own the infrastructure.”

• Tim Higgins [06:14]: “Tim Cook has really made a big effort and a really big brand positioning that Apple protects that data.”

• Tim Higgins [07:30]: “We see Meta Platforms CEO Mark Zuckerberg talking about how smart glasses are the perfect device... They are gobbling up that data to make your AI experience that much more personal.”

• Tim Higgins [09:09]: “There’s a general kind of consensus among some investors that Apple is behind in AI... There are some who are optimistic in Apple's approach.”

This comprehensive analysis provides listeners with a clear understanding of the current dynamics shaping the tech industry's future, particularly highlighting the strategic maneuvers of tech giants and the unique positioning of Apple in the AI domain.

Transcript

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[Peter Ciampelli]

Welcome to Tech News briefing. It's Friday, August 15th. I'm Peter Ciampelli for the Wall Street Journal. The biggest tech firms are spending record amounts of money and. And they're spending it on building things. We spoke to a Wall Street Journal columnist who says that these tech companies are becoming infrastructure companies and that they're following in the path of the old railroad and steel titans. And then AI has Apple in a tough spot. One of Apple's core principles is privacy, which goes against the strategy of other companies like OpenAI and Meta that make their AI more personal by gobbling up large amounts of user data. But Apple is betting big that even if they're slower moving on AI, prioritizing user privacy will help them win in the end. But first, we're entering an era in which tech giants grow and protect their spot at the top by owning and building out physical assets. That includes the real estate, data centers and chips that are crucial to these huge firms advancing in AI columnist and Bold Names, co host Christopher Mims says that tech companies are entering an age of infrastructure. The Wall Street Journal's Bell Lin spoke with him to learn more.

[Christopher Mims]

Christopher, why do you make the argument that today's tech giants are becoming more like the robber barons of yore? Or in other words, spending vast amount of money on actual stuff rather than code?

So there's been this big change. I started covering tech more than a decade ago. You would look at the quarterly filings for a company like Meta, and what felt like the big liability was that the exploding cost in terms of payroll. They were just hiring engineers. So quickly you look at their balance sheet now, or any of the big tech companies, Amazon, Alphabet, et cetera, and the big expenditure now is on stuff. It's real estate, it's data centers, it's microchips, it's the things to cool the microchips in the data centers. It's even energy now to power these systems. So we're entering what I call this age of infrastructure where like in the days when you had Carnegie and Rockefeller and the rest controlling the rails and coal and steel. In some ways, the big differentiator for these companies, or at least the way that they are maintaining their competitive moat, is they own the infrastructure, they own the rails that the Internet is running on. Of course, the big spend in the past four quarters has been all on AI. And AI data centers.

And there's this really eye popping number on your recent column that the magnificent seven tech firms have collectively spent $102.5 billion on capital expenditures in their most recent quarters. Why is this happening at such a breakneck pace?

Some of the folks who I have talked to who build actual data centers and are responsible for creating this infrastructure have said to me that they think that there is this intense FOMO right now among the so called hyperscalers, Amazon, Google, Matt, even though they don't sell that compute to others where they think the risk of missing out on the AI boom is bigger than the potential downside of overbuilding during this time that is increasingly looking very frothy. You can never say something's a bubble until after the fact, but it's really incredible. Just the hockey stick like growth in capex spending and how that's coming directly out of free cash flow.

And it's not just the U.S. right? Who are the other big tech spenders of actual stuff?

Across the globe, China has become such a big spender on AI data centers that the President of China, Xi Jinping has said, I think probably we're overspending. You know, not every province needs to have its own AI infrastructure build out. I mean it's a little reminiscent of the real estate bubble in China which the central government also had to reign in. In the Middle east there's huge spending. That's why Trump and a lot of CEOs of these companies went to the Middle east not so long ago and declared these multi billion dollar deals. And there again the energy side makes sense. It's here are these Gulf states with this surplus of energy. Why don't they just build some data centers and then start to convert that oil wealth into another type of wealth?

[Peter Ciampelli]

That was Wall Street Journal columnist Christopher Mims. Coming up, Apple's focus on privacy is slowing them down in the AI race, frustrating their investors as their competitors eat up as much data as possible. That's after the break.

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[Peter Ciampelli]

Apple is a unique player in the AI field. One of Apple's core principles is protecting user privacy. And they want to keep protecting that while they build their AI offerings like Apple Intelligence and Siri, this is totally different than the approach by ChatGPT owner OpenAI and Meta, who both use tons of user data to make their AI more personal. Tim Higgins, Wall Street Journal columnist and co host of the Bold Names podcast, joins us to walk through Apple's dilemma. So, Tim, why do Apple's efforts on privacy confine them in unique ways compared to other companies? And what can other companies offer in terms of AI that Apple can't?

[Tim Higgins]

Well, first, it's really important to understand just the ethos of Appleapple, especially under CEO Tim Cook. And that is the idea that the data that's created on your iPhone, a very personal device, is private, unlike a lot of other tech companies out there trying to monetize that data. Tim Cook has really made a big effort and a really big brand positioning that Apple protects that data. It doesn't use data that the user hasn't agreed to allow that. It keeps a lot of data on the phone or in encrypted cloud spaces. So that is kind of Apple's history, its ethos. And then as we move into the world of artificial intelligence, the advances that we are seeing are made possible in large part because of all of the data that we have out there. Think of all of the information that's on the Internet that can be taken and fed into these models to become smarter and it becomes more useful, more personal, if you will, the more personal data you feed into the AI. And so right there you can see kind of the tension.

[Peter Ciampelli]

Can you outline in terms of user facing AI features, what is Apple offering compared to OpenAI and Meta?

[Tim Higgins]

Yeah, so right now Apple is the main device it has is the iPhone. What's different here and where the industry is going is really the idea of a personal device that is the gateway to your AI assistant. So we see Meta Platforms CEO Mark Zuckerberg talking about how smart glasses are the perfect device. Really the future of personal computing. Think about it. They're on your face, going with you everywhere. They are seeing everything you see, they are hearing everything you hear. They are gobbling up that data to make your AI experience that much more personal. OpenAI is also talking about its own kind of future of computing device. They haven't talked a lot about the details. They have painted a picture also of a personal AI assistant that is out there enabling kind of a sci fi future potential. Something that is not a phone, something that's not a computer, a third device, if you will. We don't know quite yet what that might be, but in general the trend is this idea that the AI is with you and gobbling up this information in a way that can really be useful to personalize your AI experience. And right there you can see the tension with kind of the Apple kind of view of the world where the AI might live on the device. The question is, can they have the same kind of computing, same kind of features that Meta and OpenAI are predicting that they can have?

[Peter Ciampelli]

What's the response been like from customers and investors to Apple's AI features? It seemed like Apple over promised in last summer's announcement of what the new iOS would be like.

[Tim Higgins]

There's a general kind of consensus among some investors that Apple is behind in AI, whether it's in the investment or the capabilities that really is allowing laggard in the field, especially when you look at the things that OpenAI is doing. That said, there are some who are optimistic in Apple's approach, the idea that they can differentiate themselves in a world where AI is everywhere, that maybe Apple is going to be able to provide a continuation of that brand. Promise of privacy so what's the status.

[Peter Ciampelli]

Of Apple's AI products right now and what could they look like in the future?

[Tim Higgins]

They have a relationship with OpenAI to augment some of their chat features. If you were to go into your iPhone and try to use it, you've got to opt into. You acknowledge that you're using something that's outside the Apple kind of walled garden, if you will. And that's the state of the being, the kind of the bigger vision that they have painted with something that's more like an AI sidekick that understands what you're doing on your phone and can help you navigate your life. They're not quite there yet. One of the things that Apple has tried to do with its AI efforts in the past year or so is offer systems that offer what they say are private. And they're doing that in a few ways. They are doing compute, the AI thinking, if you will, on the device, on the iPhone. And then they also have a special remote computer system, a cloud, as we call it in the business, that they say is encrypted. And so those are some of the efforts that they are doing that are different than others out there.

[Peter Ciampelli]

That was Wall Street Journal columnist Tim Higgins. And that's it for Tech News Briefing. Today's show was produced by Julie Chang. I' your host. Peter Ciampelli, Jessica Fenton and Michael Lavalle wrote our theme music. Our supervising producer is Melanie Roy. Our development producer is Aisha Al Muslim. Scott Salloway and Chris Sinsley are the deputy editors, and Falana Patterson is the Wall Street Journal's head of News Audio. We'll be back later this morning with TNB Tech Minute. Thanks for listening.

[Sierra AI]

No matter the industry, how businesses connect with customers defines their brand. And today, connection starts with a conversation. Sierra is the AI platform for businesses that want to provide better, more human customer experiences. With Sierra, your AI agent solves problems fast. No endless hold music, no canned responses. Please press 1. No frustration, just better customer experiences built on Sierra. Visit Sierra AI to learn more.