AI gadgets have been a dud so far. Apple is looking to change that – NBC New York

• Apple plans to unveil its first series of AI-powered iPhones on Monday.
• Companies like Microsoft, Samsung and Google have tried selling AI-powered hardware, but with little success so far.
• Apple will need to convince customers to pay for new hardware to show Wall Street that the iPhone upgrade cycle is ongoing.

In late 2022, the launch of ChatGPT by OpenAI sparked a surge in interest in the possibilities of artificial intelligence.

Within months, the world’s biggest tech companies, including Microsoft, Meta, and Google, joined the party with their own AI chatbots and generative AI tools. By the end of 2023, Nvidia had proven to be the only company in the world capable of making a ton of money providing these services.

Fast forward to 2024, and our favorite gadgets are becoming a big topic in AI, with tech companies trying to bring AI to phones and laptops.

Earlier this year, Samsung launched the AI-powered Galaxy S24 smartphone. Microsoft, working with companies like Dell, HP, and Qualcomm, began selling a new generation of AI computers in the summer, called the Copilot+ PC. A few weeks ago, Google launched the Pixel 9 series of AI phones.

So far, I’ve been unimpressed by these new devices. Rather than creating entirely new experiences, they’ve introduced features that make it easier to edit photos, talk to a chatbot, or provide live captions for videos. Then there’s Humane’s AI Pin, a clip-on gadget that launched in April and was immediately criticized in reviews. In August, there were reports that daily returns were outpacing sales.

Apple will try to change the narrative.

The company is set to unveil a new family of iPhones on Monday, equipped with the AI ​​features announced in June. The system is called Apple Intelligence and will roll out over the coming months. Current Apple devices, such as the iPhone 15 Pro and some newer iPads and Macs, will also have access to it.

But Apple Intelligence will be free. So the company has to convince hundreds of millions of iPhone customers that it’s time to update.

That’s what Wall Street is watching as the latest iPhone models go on sale this month. Will Apple Intelligence sell more iPhone models? Or will the post-pandemic sales slump continue?

“The truth is that GenAI is still in its early stages of development, and the use cases announced are likely just the tip of the iceberg of what lies ahead,” said Nabila Popal, a mobile analyst at IDC.

Apple plans to roll out Apple Intelligence in phases. It will initially be available only in English (U.S.) and will likely be blocked in countries with strict AI regulations, such as China. Additionally, many of the features Apple announced in June won’t be ready on day one. Instead, they’ll be rolled out in phases over the coming months.

Due to Apple’s deliberate implementation strategy, even the most optimistic analysts predict that it will be years before the company makes its AI solutions available to approximately one billion iPhone users.

Do consumers want gadgets with artificial intelligence?

Apple typically adds modest improvements to its iPhones every year. The camera gets a little better. The processors get faster. Battery life improves. None of that is compelling enough to make consumers rush to upgrade every year or two, like they did in the early days of the iPhone, when big hardware innovations were the norm. You can expect the same sort of iterative hardware improvements in this year’s phones.

This puts more pressure on Apple Intelligence to deliver. But consumer appetite is a question mark.

A recent study by research firm Canalys found that only 7% of consumers are “very likely” to make purchasing decisions based on AI. Interest is much higher in Apple’s two most profitable markets, the US and China, but there is a huge gap between them.

In the U.S., 15% of respondents said they were very or very likely to buy gadgets because of AI. In China, where consumers are more concerned with technical specifications, that number was 43%. The relatively weak interest, especially in the U.S., suggests Apple will need its marketing machine to tell a compelling story about what AI can do for the typical iPhone user.

“There are a lot of interesting features, but you have to make them available to the average user in situations where they can use them multiple times, not just as a one-time feature,” said Gerrit Schneemann, an analyst at Counterpoint Technology. “It’s hard to tell that story in a store with a poster or a two-second sales pitch.”

Apple Intelligence will leverage personal data stored on your phone and help improve Siri into a more capable assistant. In addition, app developers will be able to tap into Apple’s intelligence, so you can use it anywhere on your phone. Schneemann said it’s a fresh take on AI compared to Google or Samsung.

“There is potential to accelerate the education process and penetrate the market,” he said.

Samsung’s Galaxy S24, its latest flagship, has outsold last year’s model. But there’s little evidence that AI is the main driver, IDC’s Popal said. Apple is in a different category.

“The psychology of Apple’s premium customers is different,” Popal said, adding that many iPhone buyers buy their phones on financing plans that make it easier to upgrade.

Google recently launched the Pixel 9 series of phones, which have the company’s AI digital assistant, Gemini, built into its software. Google’s smartphones have never been major sellers, but they often show what’s possible with Android phones before those features make it to Samsung or Motorola devices.

The Pixel’s headline feature is the Gemini version, which lets you have natural conversations instead of responding to individual commands. This feature should be coming to other Android phones with Gemini in the future.

While reviews of the Pixel 9 have been positive, it’s still too early to tell whether AI will eventually impact sales.

On the PC market, Microsoft’s Copilot+ launched this summer, but without its signature AI feature, Recall. (Microsoft learned the hard way that it’s not a good idea to launch a product that takes screenshots of everything you do on your computer every few seconds.) Recall will hit that market in late fall, available to a limited number of early testers.

Without Recall, there isn’t much AI in this batch of AI computers.

The real benefit for now seems to be the power and efficiency of Qualcomm’s new PC chips, which debuted in the Copilot+ computers. The processors are based on the same technology as the phone’s chip, meaning they’re still plenty efficient without draining the battery.

“This is a transformation of the traditional PC, transforming it into a mobile device,” said Alex Katouzian, general manager of mobile and wearable technologies at Qualcomm. He said Microsoft is working on more AI features and addressing privacy concerns with Recall.

Microsoft said it expects 50 million Copilot+ computers this year, which would be about 1 in 5 of the computers it expects to ship. Katouzian said the Qualcomm-based Copilot computers are “on track” for now.

Still, Copilot computers made up a “relatively small percentage” of computer sales at Best Buy this summer, CEO Corie Barry said during the company’s latest earnings conference call. She added that customers “just want to upgrade and upgrade” without having to find or spend a lot of money on an AI-powered device.

Apple’s implementation of artificial intelligence

If Apple can buck this trend and successfully delight its customers with Apple Intelligence, the next step will be to roll it out globally to boost iPhone sales in markets outside the U.S.

There are other obstacles standing in his way.

China, where Apple generates almost a fifth of its sales, requires government approval before an AI model can be introduced in the country. Apple CEO Tim Cook He told CNBC in August that his team was working with Chinese regulators to make that happen.

Then there’s the EU, which has passed a stringent series of laws regulating the activities of the world’s biggest tech companies. Apple said this summer that it wouldn’t launch Apple Intelligence in the EU right away because of those regulations.

In the meantime, Apple Intelligence users will be members of a relatively exclusive club. Apple’s job is to convince customers to pay for a new device and join.

“We’re very excited about the value that Apple Intelligence brings to users,” Cook told CNBC in August. “So we think it’s another compelling reason to upgrade…we’ll see how the season goes when we start shipping, but we’re very excited about it.”

Fix: Humane’s AI pin was introduced in April. An earlier version incorrectly listed the month.

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