iPhone Duo to iOS 27: What New AAPL Products Mean for Siri AI, CapEx & GOOGL

attention over to the Apple Surprise and Shine event today. Welcome in our next guest, Dave Nicholson, Chief Research Officer at Futurum. Dave, great to have you on. I was very struck and also happy to see your notes that just came over, and thank you for putting them together so quickly as we just got all this information. You say what really matters of everything we got today is not this foldable phone. It's not the iPhone 18, it's not the watch, it's not any of that. It is the software update that is coming our way on Monday. Why is that? That's right. Molly. Yeah. Good to be with you. Because it sort of bears out this thesis that I've been putting forth, you know, in the face of much criticism for the last couple of years. And that is that this walled garden that Apple has, what they're now referring to as personal context, is the real value behind what Apple has to offer in AI moving forward. So this whole idea that I'll call her Shirley, so my, my devices don't activate surely knows everything about you. It knows your calendar. It knows your payment methods. You can, you can say, hey, Shirley, let everyone know I'm going to be late and order me a coffee. And it knows exactly what you know, what you want it to do, and it can execute on that. And one of the mentions in, in the event today was this idea that some of these advanced features are going to cost you a little extra money. So Apple might end up being the most profitable purveyor of AI services over the next few years on the globe. And so let's look at the reaction though. I mean, these events are not typically huge catalysts for Apple today. Slightly different setup with the new CEO at the helm. But right now we're down about 2/10 of a percent. Is there an argument to be made that the markets are just fully underestimating what personal context could mean overall for Apple. They just haven't caught up here. Yeah. I think this is a failure of the verticalization of analysis. People are looking at this from the perspective of the devices. And you know what was announced and is the new 18 Pro Max that much better. And you know everybody's got a folding phone. Does the duo really matter. What will that. Is that going to move the needle. They're missing the headline here. The headline here is all about personal context in AI. You know, one of my quotes is, hey, they let everyone else build the highway system. They've got several billion users that are ready to now drive on this highway system. So I think people are just missing it, frankly. And you made a very striking comparison that I want to bring up here. We've talked so much about Apple being the laggard in AI, and at many points Apple has been the laggard period. But you have a comparison $13 billion to $700 billion. The 13 of course is Apple's CapEx. The 700 is the CapEx for Amazon Microsoft Alphabet and meta. When you look at it like that and you apply your thesis that they may have just because of their walled garden won this AI race because they already have the established user base, does that mean that the rest of these names massively overspent on AI infrastructure? I would characterize it as as follows. I would say that the investment of 13 billion is going to have much higher returns than the 700 billion will across a similar time horizon, I'd say 2 to 3 years out. We'll be able to validate that and look back and say, wow, that investment from Apple was was strategic. And I think this moment, with this release of iOS 27, will be seen as the beginning of their consolidation around this idea of personal context. And let's talk about this strategy because $1 billion about per year of what Apple's spending is in a custom model, that they're basically renting a Gemini model from Google. So as you look at that, is that smart capital allocation or have they opened themselves up to a strategic vulnerability because they've relied on a competitor for the core intelligence? Well, there's a there's a bigger question at play. And the question is, where does the value of AI really live? And is it in the leading edge of frontier models, the most expensive models, or is it in this sort of open weight universe of models that everyone else is supporting right now? And I think the answer to your question is that is good enough, always will beat perfect in the market. And so if Apple is proving out that they have rented good enough, they don't have to be as good as the frontier model purveyors. They don't have to invest as much in CapEx to build out those capabilities, because what they'll deliver is good enough, layered on top of personal context. And so as we get this roll out, it's only in English to start. It's not going to be available in the EU, in China. How much does the geographic limited constraint here? Does it affect the potential opportunity. Because there are likely also regulatory hurdles involved in in these other two areas. Yeah, it affects timing. And a great analogy would be full self-driving capability for Tesla. Same thing. These things have to face regulatory hurdles country by country, region by region. So if you're looking at this in terms of the stock symbol and as an investor, that will definitely serve as a moderator in terms of how value will be unlocked, there will be things that you and I will be able to do in the US well before our compatriots in other countries. We'll have access to them. And Dave, let's talk about the foldable phone because obviously that's the big headline. The foldable phone is here. Do you view this as as a real potential growth driver for Apple, or is this just another premium offering that isn't really going to move the needle overall because the price point is so high? Yeah. Yeah. It's it's cool. And if you're an Apple person, you look at this like, oh my gosh, a folding phone. It's the first time you've ever seen one. So it's not going to move the needle in comparison to, again, this personal context idea with AI, but I think I, I think it's going to perform better than people expect, even at the $200 plus price point, but I would not be looking to it as the foundation of, of Apple's valuation and, you know, stock price moving forward. And how about the Apple Watch with this intense development in the AI and its personal context and its ability to go through your metrics and everything you have stored in your Apple ecosystem. I've had a few conversations about how the Apple Watch could really become the next big growth driver. As it moves more into this health and wellness. It already has access to your metrics. Is there an untapped AI potential in the watch in terms of offering health services here that we should be keeping an eye on? Yeah, absolutely. And again, it goes back to personal context. In fact, the most personal of context, your health information. And so as the devices that you're wearing on your wrist become more intelligent and more accurate, and as they can gather more data, that data absolutely feeds into this idea of personal context and, and something that can be leveraged from a value perspective. Yeah. So that's a big, big driver. And so as you're, as you're looking at at all of these releases, we finally got the AI update. You're thrilled with it. The market may not have caught on quite yet to how thrilled they should or should not be at this point. But what does John Ternus have to do next? I mean, this was his first event. We made a big hullabaloo about his first event. We got the foldable phone, but now we've got this software. He's the hardware guy. So is the software update and the AI going to be enough to really drive? If we can get the rest of the market to catch on here? Or does he need to have another flashy product lineup to keep the confidence behind him? No, in my opinion, it's all about staying the course. He's been. He's been handed the tiller. As long as he doesn't steer the ship into the rocks, they're going to be just fine. And people will continue to accuse Apple of being laggards first followers. And that's fine with the foldable device with with the area of AI. But the reality remains they have our data and we trust them to a certain degree. Those are both huge hurdles to overcome. Those are huge barriers of entry, barriers to entry for anyone who would seek to compete. And so I do see them as a less volatile place to park park money moving forward. But as far as the new CEO is concerned, right now, it's time to just stay on a steady course. And, you know, in the next two years, he'll have his moment where, where, where some new development will be assigned to him personally. Yeah, 2.5 billion devices where we've all hit save our information, keep our information. Frankly, without my, I don't know, half my passwords or information. So you've made your point to me, Dave, really appreciate you joining us to take a closer look at the event and also for the insight there on something that's not being as talked about as much this software