another banger from Ben
Apple, Amazon, and AI
There were striking resemblances in last week’s earnings calls from Apple and Amazon, not just to each other, but to this early smartphone era that I have just recounted. Both companies are facing questions about their AI strategies — Apple for its failure to invest in a large language model of its own, or deeply partner with a model builder, and Amazon for prioritizing its own custom architectures and under-deploying leading edge Nvidia solutions — and both had similar responses:
It’s Early
Tim Cook (from a post-earnings all-hands meeting):
Cook struck an optimistic tone, noting that Apple is typically late to promising new technologies. “We’ve rarely been first,” the executive told staffers. “There was a PC before the Mac; there was a smartphone before the iPhone; there were many tablets before the iPad; there was an MP3 player before iPod.” But Apple invented the “modern” versions of those product categories, he said. “This is how I feel about AI.”
Andy Jassy:
The first thing I would say is that I think it is so early right now in AI. If you look at what’s really happening in the space, it’s very top heavy. So you have a small number of very large frontier models that are being trained that spend a lot on computing, a couple of which are being trained on top of AWS and others are being trained elsewhere. And then you also have, I would say, a relatively small number of very large-scale generative AI applications.
The most optimistic AI scenarios, however, point to something new:
A better word for “Anywhere” is probably autonomous, but I wanted to stick with the “Where” theme; what I’m talking about, however, is agents: AI doing work without any human involvement at all. The potential productivity gains for companies are obvious: there is a massive price umbrella for inference costs if the end result is that you don’t need to employ a human to do the same work. In this world what matters most is performance, not cost, which means that Amazon’s obsession with costs is missing the point; it’s also a world where the company’s lack of a competitive leading edge model makes it harder for them to compete, particularly when there is another company in the ecosystem — Google — that not only has its own custom chip strategy (TPUs), but also is integrating those chips with its competitive leading edge large language model (Gemini).
We are still far from the metaverse, to be clear, or on-demand interfaces in general, but it’s stunning how much closer we are than a mere three years ago; to that end, betting on current paradigms may make logical sense — particularly if you dominate the current paradigm — but things really are changing with stunning speed. Apple and Amazon’s risk may be much larger than either appreciate.