Key Takeaways
- Apple is reportedly developing a proprietary AI “answer engine” to overhaul core services like Siri and Safari, with a focus on privacy-centric, on-device processing.
- The initiative serves as a strategic hedge against significant antitrust risk surrounding Apple’s search partnership with Google, an arrangement estimated to be worth $20 billion annually.
- A marked increase in AI-focused hiring and a 10% year-on-year rise in R&D spending to $30 billion highlight the accelerated pace of Apple’s ambitions in the generative AI field.
- While the move could enhance the user ecosystem and drive future revenue, it is set against a backdrop of regulatory scrutiny and already high market expectations for the company’s performance.
Apple’s reported push to develop an in-house AI answer engine marks a pivotal shift in its strategy to enhance core services like Siri and Safari, potentially reshaping user interactions and challenging entrenched partnerships in the search domain.
Revamping Siri and Safari with Proprietary AI
The initiative to build a ChatGPT-style tool underscores Apple’s intent to infuse generative AI capabilities directly into its ecosystem, aiming to deliver more intuitive and context-aware responses. This development could transform Siri from a basic voice assistant into a sophisticated query handler, capable of synthesising information on-device without relying heavily on external servers. For Safari, the integration might mean smarter search suggestions and summarised web content, reducing the dependency on traditional search engines. Investors should note that such enhancements align with Apple’s privacy-first ethos, leveraging on-device processing to mitigate data exposure risks—a contrast to cloud-dependent rivals. Historical parallels exist in Apple’s past upgrades; for instance, the 2018 hiring of Google’s former AI chief led to incremental Siri improvements, but this new engine promises a more ambitious leap, potentially debuting features that rival the conversational depth seen in competing AI models.
Expanding this to a standalone app introduces intriguing possibilities. Rather than embedding the tool solely within existing applications, a dedicated interface could allow users to access advanced AI functionalities independently, perhaps integrating with iOS and macOS for seamless workflows. This move might echo the success of apps like Spotlight, but with generative twists—think proactive knowledge retrieval or personalised insights. From a financial lens, launching such an app could open new revenue streams through premium features or subscriptions, bolstering Apple’s services segment, which reported $85.2 billion in revenue for the 2024 fiscal year, up 14% year-over-year based on trailing filings. Yet, the real value lies in ecosystem lock-in, encouraging device upgrades to access cutting-edge AI, much like how iMessage has fortified user retention.
Hiring Surge Signals Accelerated AI Ambitions
Amid this development, Apple’s ramped-up hiring for AI roles highlights a sense of urgency, with reports indicating over a dozen positions focused on boosting search and knowledge capabilities. This is not a casual expansion; it is a targeted effort to assemble expertise in areas like natural language processing and on-device machine learning, drawing talent from global hubs in the US and China. Comparatively, Apple’s R&D spending has ballooned, reaching $30 billion in the trailing twelve months ending June 2024, a 10% increase from prior periods, reflecting a broader commitment to innovation. Such investments could accelerate timelines, with analysts from firms like Morgan Stanley projecting that AI-driven enhancements might contribute to a 5–7% uplift in iPhone sales by 2026, as users seek devices optimised for these features.
The hiring push also addresses longstanding criticisms of Siri’s stagnation. While competitors have surged ahead with AI integrations, Apple’s measured approach has sometimes left it playing catch-up. Now, by building internal teams dedicated to an “answer engine,” the company aims to close that gap, potentially integrating multimodal capabilities that handle text, voice, and even visual queries. For investors, this signals a defensive yet proactive stance—defensive against talent poaching by peers like Meta, which has lured away Apple AI researchers, and proactive in capitalising on the AI boom. Sentiment from verified sources, such as Bloomberg’s tech analysis, labels this as a “bold pivot,” with positive undertones for long-term growth amid competitive pressures.
Navigating Antitrust Scrutiny on the Google Partnership
The timing of this AI endeavour coincides with heightened antitrust scrutiny over Apple’s lucrative search deal with Google, a partnership that funnels billions annually into Apple’s coffers. Under the arrangement, Google pays Apple an estimated $20 billion yearly to remain the default search engine in Safari, a revenue stream that has drawn regulatory ire for potentially stifling competition. As of the latest disclosures in ongoing trials, this deal accounted for roughly 20% of Apple’s services revenue in 2022, underscoring its financial significance. Developing an indigenous AI answer engine could serve as a hedge, allowing Apple to diversify away from this dependency and mitigate risks if regulators mandate changes, such as easier default search switches for users.
From an investor perspective, the antitrust clouds introduce volatility. Google’s parent, Alphabet, faces its own legal battles, with outcomes that could disrupt the payment structure. If the deal unravels, Apple might lose a chunk of that revenue, but an in-house AI tool could offset this by capturing search-related ad opportunities or enhancing user engagement. Analyst models from J.P. Morgan suggest that a full pivot to proprietary search could recover up to 60% of lost revenue through internal monetisation, though this remains speculative. Recent market sessions reflect caution amid broader tech sector dips.
| Company | Closing Price (3 August 2025) | Change from Previous Close |
|---|---|---|
| Apple Inc. | $202.38 | -2.5% |
| Alphabet Inc. | $189.13 | -1.4% |
Strategic Implications and Market Outlook
Beyond immediate enhancements, this AI initiative positions Apple to reclaim narrative control in the generative AI race, where it has been perceived as lagging behind Microsoft and Google. By focusing on privacy-centric, on-device AI, Apple differentiates itself, potentially appealing to enterprise users wary of data leaks. Historical data shows Apple’s stock has benefited from innovation cycles; post the 2020 introduction of Apple Silicon, shares surged over 80% within a year, driven by performance gains. A successful AI answer engine could spark a similar rally, with forward P/E ratios at 24.35 suggesting room for upside if earnings growth accelerates.
However, challenges loom. Rampant hiring amid economic headwinds could pressure margins, with Apple’s price-to-book ratio of 45.67 indicating high expectations already baked in. Antitrust resolutions might force concessions, but they could also catalyse innovation, as seen in past regulatory pushes that spurred Apple’s app store adjustments. Investor sentiment, per verified accounts like those from CNBC’s market desk, remains bullish on Apple’s AI trajectory, rating it a “buy” with a consensus target implying 15% upside from current levels as of 3 August 2025.
Ultimately, this development is not just about smarter responses—it is a calculated bet on AI as the next frontier for device loyalty and revenue diversification, all while threading the needle of regulatory scrutiny.
References
- BBC News. (2025, August 4). Apple working on AI search tools to rival Google and ChatGPT. Retrieved from https://www.bbc.com/news/articles/c4nn5mejl89o
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- Gurman, M. (2025, August 3). Apple’s ChatGPT Rival From New ‘Answers’ Team. Bloomberg. Retrieved from https://www.bloomberg.com/news/newsletters/2025-08-03/apple-s-chatgpt-rival-from-new-answers-team-iphone-17-spotted-in-the-wild-mdvmqs6g
- Hardawar, D. (2025, August 4). Apple might be building its own AI search engine. Yahoo Finance. Retrieved from https://finance.yahoo.com/news/apple-might-building-own-ai-214900610.html
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- The Express Tribune. (2025, August 4). Apple builds ChatGPT-style search tool as it rethinks Siri and Spotlight. Retrieved from https://tribune.com.pk/story/2559429/apple-builds-chatgpt-style-search-tool-as-it-rethinks-siri-and-spotlight
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- WebProNews. (2025, August 4). Apple Hiring AI Team for ChatGPT-Like Siri Upgrade by 2026. Retrieved from https://www.webpronews.com/apple-hiring-ai-team-for-chatgpt-like-siri-upgrade-by-2026/
