Apple "well-positioned" to benefit from AI despite DeepSeek emergence, Baird says

Investing.com - Apple (NASDAQ: AAPL) is less exposed to the emergence of DeepSeek's artificial intelligence model than its other Big Tech rivals who have invested heavily in building out their AI capabilities, according to analysts at Baird.

In a note to clients, the analysts argued that the iPhone maker, as a "leading" manufacturer of consumer-facing products, is "well-positioned" to benefit from so-called generative AI "without spending tens of billions of dollars on [large language models] or infrastructure".

Although the company is continuing to roll out its Apple Intelligence AI-enhanced service in its latest iPhone offerings, the competitive impact of DeepSeek's low-cost AI model is "limited", the analysts said. Indeed, longer term, expanding generative AI capabilities could catalyze a "better cycle" of product upgrades, they noted.

DeepSeek, a small Chinese start-up, roiled global stock markets on Monday after it introduced a free chatbot it says can compete with the likes of OpenAI's ChatGPT, albeit with less data and at a fraction of the cost.

The firm said it took a mere two months and under $6 million to build out its AI model on Nvidia (NASDAQ: NVDA)'s lower-capability H800 chips. DeepSeek's assistant, which is run on the model, became the top-rated app on Apple's App Store in the US on Monday, overtaking OpenAI's ChatGPT.

Although doubts still surround DeepSeek's claims, the statement fueled worries that massive spending on AI by the US tech industry's biggest names was unwarranted. U.S. President Donald Trump said the company represented a "wake-up call" for America's tech giants.

In its fiscal fourth quarter, Apple said payments for property and equipment -- a gauge of capital expenditures -- rose by $2.91 billion to $9.45 billion. The amount was relatively more modest than the plans put forward by peers like Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META), partly because Apple uses third-party data centers for some of its AI work.

Apple is due to report its December quarter results after the closing bell on Wall Street on Thursday.

(Reuters contributed reporting.)

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