Apple’s New CEO Inherits an AI Strategy Built on Outsiders

Apple’s New CEO Inherits an AI Strategy Built on Outsiders

John Ternus becomes Apple’s CEO on Sept. 1, inheriting Tim Cook’s bet that Apple can license its way to AI parity, paying Google roughly $1 billion a year for Gemini to power a rebuilt Siri, a bet rivals spending over $100 billion apiece on their own AI infrastructure have chosen not to make.

His first test comes Sept. 9, when Apple unveils that Siri alongside its first foldable iPhone, at the same annual event that has introduced nearly every major Apple product since the Steve Jobs era.

Even Cook admitted the harder problem is still unsolved: what it will cost Apple once people start using it, telling investors on his final earnings call that the company still doesn’t have “a complete plan” for the compute bill ahead.

John Ternus becomes CEO of Apple on Tuesday (Sept. 1), taking over a company whose defining strength has always been tight control of its own technology stack, hardware, software and the chips connecting them, but whose current artificial intelligence strategy runs largely on outside partners.

Tim Cook will become executive chairman the same day, continuing to manage Apple’s relationships with the governments and policies globally while Ternus, a 24-year Apple veteran who most recently ran hardware engineering, takes the CEO title, Apple said in its announcement. It is Apple’s first CEO transition since Cook succeeded Steve Jobs in 2011.

Ternus inherits a specific, high-stakes bet Cook already made. Apple agreed in January to pay Google roughly $1 billion a year to license a custom version of Gemini, Google’s AI model, to power a rebuilt Siri capable of cross-app actions and multi-turn conversation, CNN reported. Apple said at the time it was making no major changes to its existing ChatGPT integration, which lets Siri hand off complex queries to OpenAI’s model. That arrangement does appear secondary now that Gemini handles the core Siri experience. Both partnerships mean Apple’s most consequential AI features run on models Apple did not build itself.

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New CEO’s First Public Test Comes Just Days Into the Job

Apple will hold its annual showcase on Sept. 9, titled “Surprise and Shine” this year. It’s the same annual event, dating back to the Steve Jobs era, that has unveiled many of Apple’s most iconic products, kicking off the Ternus era. The company is expected to unveil its first foldable iPhone alongside the rebuilt, Gemini-powered Siri, Apple confirmed. Gene Munster, managing partner at Deepwater Asset Management, said before the announcement that the new Siri needed to be a “10 out of 10” when it arrived, a bar that has effectively become Ternus’ opening review as CEO rather than a one-time product launch he can distance himself from, Bloomberg reported.

The challenge is not simply catching up to OpenAI or Google on raw model capability. It is proving that Apple can build products people trust and prefer around someone else’s AI model, the same way it has spent two decades building devices around chips, displays and components it did not always manufacture itself, without losing the product experience, cost control or differentiation that outside dependency usually threatens. A Siri built primarily on licensed technology only works commercially if it still feels distinctly like an Apple product once a user is talking to it, not simply a wrapper around Gemini with an Apple logo attached.

The Better Siri Works, the More It Costs Apple

That calculation gets harder if the new Siri succeeds. Apple has built its artificial intelligence approach around a “capex-light” strategy, renting AI capability from partners like Google rather than building the data center infrastructure that rivals including Meta, Alphabet and Microsoft are spending well over $100 billion apiece on this year, Constellation Research said in its own analysis.

Cook addressed that tension directly on Apple’s July 30 earnings call, his final one as CEO, with Ternus on the line. “We’ll see what Siri AI does from the cost side of it,” Cook said, according to Apple’s earnings call transcript. “There’s also the ability when people use it a lot for them to move up on an iCloud Plan as well, and so what the balance of that is, is a bit uncertain at the moment.” That uncertainty is the exact decision Ternus inherits along with the CEO title: how Apple pays for Siri AI’s compute costs once real usage, starts coming in.

Ternus does not need to build the best AI model in the industry. He needs to prove Apple can keep building the best products in the industry around AI models it does not own, at a cost structure that does not erode the margins those products have always depended on.