1 00:00:00,040 --> 00:00:02,920 Two days ago, Apple held their highly anticipated event, the 2 00:00:02,920 --> 00:00:06,040 Worldwide Developer Conference. This is where they show off all 3 00:00:06,040 --> 00:00:08,560 the new features and all the new software they're creating. 4 00:00:08,880 --> 00:00:11,880 And this one was especially important because it was Apple's 5 00:00:11,880 --> 00:00:15,680 introduction into AI, the buzzword we've learned to love 6 00:00:15,680 --> 00:00:19,640 over the past year. Now Apple took this approach of 7 00:00:19,840 --> 00:00:23,520 the Apple way of doing AI, which means rebranding it to Apple 8 00:00:23,520 --> 00:00:27,440 Intelligence and focusing on personalization, customization, 9 00:00:27,600 --> 00:00:31,080 how the AI actually contacts the customer, and importantly, 10 00:00:31,120 --> 00:00:33,200 privacy. Now, when I watch this 11 00:00:33,200 --> 00:00:35,760 presentation, I did an entire recap of it. 12 00:00:35,760 --> 00:00:38,400 I was actually impressed by it and I don't think I'm super 13 00:00:38,400 --> 00:00:40,080 easily impressed. I genuinely thought the 14 00:00:40,080 --> 00:00:42,720 presentation was good. So Apple addressed major 15 00:00:42,720 --> 00:00:45,800 concerns both for investors and artificial intelligence and 16 00:00:45,920 --> 00:00:50,160 incentivizing future growth and defending themselves against on 17 00:00:50,160 --> 00:00:52,720 earth regulation. They did that all in a single 18 00:00:52,720 --> 00:00:55,440 presentation. Like always during the 19 00:00:55,440 --> 00:00:57,360 presentation, the stock traded down. 20 00:00:57,600 --> 00:01:00,080 And I pointed out during this that that's typically what 21 00:01:00,080 --> 00:01:01,640 happens. People are watching the 22 00:01:01,640 --> 00:01:04,480 presentation and there's so much information to take in that 23 00:01:04,480 --> 00:01:07,080 you're almost a little bit nervous of of what it all means. 24 00:01:07,440 --> 00:01:10,160 But when investors decided to sleep on it and give it a night, 25 00:01:10,160 --> 00:01:13,200 it was like they had time to wake up and realize that Apple's 26 00:01:13,200 --> 00:01:17,520 going to be OK, that their new method of going into AI is 27 00:01:17,520 --> 00:01:21,120 probably going to be successful. And the stock has been like a 28 00:01:21,120 --> 00:01:24,680 rocket ever since. The day after the presentation, 29 00:01:24,720 --> 00:01:28,080 Apple ended the day 7% in the green. 30 00:01:28,640 --> 00:01:32,680 Now that's almost $200 billion in market cap for a company like 31 00:01:32,680 --> 00:01:35,120 Apple. They quickly regained the top 32 00:01:35,120 --> 00:01:37,760 position for Microsoft as the largest company in the world. 33 00:01:38,200 --> 00:01:41,840 And now we move on to day 2 after the same presentation, and 34 00:01:41,840 --> 00:01:46,320 it's up another 6%. These are incredible gains for a 35 00:01:46,320 --> 00:01:50,680 company this size, back-to-back high single digit gain days. 36 00:01:51,040 --> 00:01:53,160 You don't see that often with a company like Apple. 37 00:01:53,480 --> 00:01:57,920 So investors really had time to kind of boil down and digest the 38 00:01:57,920 --> 00:02:01,200 different news in this developer conference, and it seems like 39 00:02:01,200 --> 00:02:03,000 they like it. They're buying more and more 40 00:02:03,040 --> 00:02:05,480 into Apple strategy. Now, one person that has been 41 00:02:05,480 --> 00:02:08,440 covering Apple for a long period of time from a consumer 42 00:02:08,440 --> 00:02:12,160 perspective, from a reviewer perspective, is Marcus Brownlee 43 00:02:12,160 --> 00:02:14,680 or MKBHD. You probably know him because he 44 00:02:14,680 --> 00:02:17,840 has an incredibly widely popular tech review channel. 45 00:02:18,320 --> 00:02:20,320 I think he's the most popular in the world at this point. 46 00:02:20,320 --> 00:02:23,640 So he went to the event and he also got the chance to sit down 47 00:02:23,640 --> 00:02:25,840 with Tim Cook. He sat down with Tim Cook for 48 00:02:25,840 --> 00:02:29,080 around 15 minutes and asked him about this specific event, about 49 00:02:29,080 --> 00:02:31,600 Apple intelligence, how it's different than AI. 50 00:02:31,880 --> 00:02:35,360 He asked him about privacy, the handoff to open AI, and the 51 00:02:35,360 --> 00:02:38,440 partnership with open AI, and a lot of different subjects. 52 00:02:38,720 --> 00:02:40,280 So we're going to go through this interview. 53 00:02:40,520 --> 00:02:43,680 I want to kind of translate what's going on here and what I 54 00:02:43,680 --> 00:02:46,680 believe Tim Cook is doing from an investment perspective. 55 00:02:47,000 --> 00:02:49,880 So this interview is more from a consumer perspective, from a 56 00:02:49,920 --> 00:02:53,040 tech reviewer perspective, but I want to give you my thoughts as 57 00:02:53,040 --> 00:02:55,480 an investor in Apple. So we have a lot to get to. 58 00:02:55,480 --> 00:02:57,720 If you like this type of content, you can consider liking 59 00:02:57,720 --> 00:02:59,680 the video or subscribing to the channel. 60 00:02:59,680 --> 00:03:01,640 Now, let's go ahead and start off with this interview. 61 00:03:01,920 --> 00:03:04,480 This is Marcus Brownlee and Tim Cook Day. 62 00:03:04,840 --> 00:03:07,120 Which was really fun to watch. It was a whole 2 hours. 63 00:03:07,560 --> 00:03:10,000 I want to zoom all the way out because obviously a lot of talk 64 00:03:10,000 --> 00:03:15,000 about AI in general and I, I'm kind of just left wondering how 65 00:03:15,160 --> 00:03:18,520 Apple defines AI in general because I know if you ask a 66 00:03:18,520 --> 00:03:22,000 regular person, you might hear about generative AI, chat box, 67 00:03:22,000 --> 00:03:24,480 things like that. And these are relatively new 68 00:03:24,480 --> 00:03:27,960 additions to Apple's AI portfolio. 69 00:03:28,320 --> 00:03:34,000 How do you look at AI as Apple? Well, we've been executing with 70 00:03:34,080 --> 00:03:38,080 AI for a long time. It's that you're wearing a 71 00:03:38,080 --> 00:03:41,760 watch. It's at the root of the watch. 72 00:03:41,760 --> 00:03:44,640 I mean, you think about things like crash detection, fall 73 00:03:44,640 --> 00:03:48,960 detection, things like a fib and all of this kind of stuff is 74 00:03:48,960 --> 00:03:50,680 machine learning at the end of the day. 75 00:03:51,160 --> 00:03:54,320 And so, but what has captured people's imagination is 76 00:03:54,320 --> 00:04:00,920 generative AI. And we see it as the opportunity 77 00:04:00,920 --> 00:04:07,280 to for a whole new curve of technology and, and providing 78 00:04:07,360 --> 00:04:11,160 and doing more things for people, providing an assistant 79 00:04:11,440 --> 00:04:15,880 for people, things that really improve people's lives. 80 00:04:16,640 --> 00:04:20,800 His answer here is so good and it's so Apple. 81 00:04:20,880 --> 00:04:23,040 This is the most Apple answer you can have. 82 00:04:23,440 --> 00:04:26,480 Apple doesn't look at things the same way most other companies 83 00:04:26,480 --> 00:04:28,880 look at things. If you go to NVIDIA, if you go 84 00:04:28,880 --> 00:04:31,960 to Google, if you go to, you know, even Android and a lot of 85 00:04:31,960 --> 00:04:35,680 cases, they've advertised their products as having this much 86 00:04:35,680 --> 00:04:39,720 storage and this many nits of brightness in their phones and 87 00:04:39,960 --> 00:04:42,080 this type of processor. And here's the name of the 88 00:04:42,080 --> 00:04:45,200 processor, right? It's all the technical specs of 89 00:04:45,200 --> 00:04:47,200 the device. And although some people can be 90 00:04:47,200 --> 00:04:50,520 impressed by technical specs, that's not the way that Apple 91 00:04:50,520 --> 00:04:52,160 tries to communicate with their customers. 92 00:04:52,480 --> 00:04:55,480 Apple just says this device is going to be better than the last 93 00:04:55,480 --> 00:04:56,680 one. It's going to be a lot better. 94 00:04:56,680 --> 00:04:58,000 It's going to be double as bright. 95 00:04:58,320 --> 00:05:02,160 It's going to be smoother. It'll it'll be more fun to use. 96 00:05:02,200 --> 00:05:04,120 You're going to love this new device. 97 00:05:04,680 --> 00:05:06,640 So it's a difference in communication. 98 00:05:06,800 --> 00:05:09,600 Apple doesn't focus their branding on whatever the latest 99 00:05:09,600 --> 00:05:11,680 tech is. They focus the branding on how 100 00:05:11,680 --> 00:05:13,520 the tech communicates with the customer. 101 00:05:13,880 --> 00:05:16,400 So instead of it being artificial intelligence or 102 00:05:16,400 --> 00:05:19,320 machine learning, it's just that you have fall detection in your 103 00:05:19,320 --> 00:05:21,240 watch or you have a fib technology. 104 00:05:21,440 --> 00:05:24,120 Those are all things the Watch does that helps the consumer, 105 00:05:24,320 --> 00:05:26,040 because the consumer can understand that. 106 00:05:26,080 --> 00:05:28,800 They can take an ominous, misunderstood and ambiguous 107 00:05:28,800 --> 00:05:32,080 technology like artificial intelligence and boil it down 108 00:05:32,080 --> 00:05:35,000 for the consumer in easy to understand terms. 109 00:05:35,000 --> 00:05:36,800 And that's what Apple really does best. 110 00:05:38,280 --> 00:05:44,400 So that's how we see it. There's obviously it's not 111 00:05:44,400 --> 00:05:47,000 without downside. And so we approach it very 112 00:05:47,000 --> 00:05:51,520 thoughtfully and and as as you heard, we. 113 00:05:52,080 --> 00:05:53,880 He says that we're doing things more thoughtfully than the 114 00:05:53,880 --> 00:05:56,400 competitors. In Apple's terms, this means 115 00:05:56,400 --> 00:05:58,320 that they're taking what competitors have done. 116 00:05:58,640 --> 00:06:01,520 They're refining it, making it a little bit better, and then 117 00:06:01,520 --> 00:06:03,600 distributing it to their millions of customers. 118 00:06:03,920 --> 00:06:06,440 That's thoughtful. That's what Apple does best. 119 00:06:06,640 --> 00:06:09,320 They don't invent new things. They just take ideas from other 120 00:06:09,320 --> 00:06:11,680 people. They refine them and improve 121 00:06:11,680 --> 00:06:14,160 them and Polish them and then distribute them. 122 00:06:15,520 --> 00:06:19,320 We have always been focused on privacy, and so privacy is a 123 00:06:19,320 --> 00:06:23,240 very key tenet of our thrust into AI, right It's. 124 00:06:23,680 --> 00:06:26,800 Interesting to watch Apple's arc with AI 'cause I, I made a whole 125 00:06:26,800 --> 00:06:30,840 piece not more than about a year ago about how Apple seems to 126 00:06:30,840 --> 00:06:34,080 never say AI, even though they have all these, these neural 127 00:06:34,080 --> 00:06:35,840 engines and machine learning and things like that. 128 00:06:36,480 --> 00:06:40,280 And, and so now we have almost this pivot where now we're just 129 00:06:40,280 --> 00:06:43,320 saying it, we're actually branding it Apple Intelligence 130 00:06:43,320 --> 00:06:46,280 now. I'm curious why that changed 131 00:06:46,280 --> 00:06:50,560 now. Well, in the in the beginning 132 00:06:50,560 --> 00:06:54,200 and threw out almost everything that we always do, we always 133 00:06:54,200 --> 00:06:56,200 talk about the benefit to the user. 134 00:06:56,880 --> 00:07:00,880 And so the benefit to the user is crash detection and fall 135 00:07:00,880 --> 00:07:05,640 detection, not the technology behind the feature. 136 00:07:06,720 --> 00:07:09,520 Apple understands that customers want to know what will affect 137 00:07:09,520 --> 00:07:12,760 them directly, not all the intricacies of the technology 138 00:07:12,760 --> 00:07:14,720 behind it. They just want to know what's 139 00:07:14,720 --> 00:07:19,520 going to affect them. And so we still, we, we still 140 00:07:19,520 --> 00:07:25,040 view it like that. But it became clear that people 141 00:07:25,040 --> 00:07:31,840 wanted to know our views on on generative AI in particular and 142 00:07:31,840 --> 00:07:35,520 and so we decided to embrace it and called it Apple 143 00:07:35,520 --> 00:07:39,840 Intelligence. About AI, if it can be used for 144 00:07:39,840 --> 00:07:41,840 nefarious things, we won't go down that road. 145 00:07:42,440 --> 00:07:45,760 And at the time, I assumed that that meant generative AI was off 146 00:07:45,760 --> 00:07:47,800 the table because of all the things that we'd seen about what 147 00:07:47,800 --> 00:07:50,520 it was potentially capable of or things that it might do. 148 00:07:52,080 --> 00:07:54,720 Has that changed? Is that something that was off 149 00:07:54,720 --> 00:07:58,280 the table and you figured now you've got the right tools or 150 00:07:58,280 --> 00:08:01,480 the right restrictions to make sure that that all goes super 151 00:08:01,480 --> 00:08:02,120 well? How do you think? 152 00:08:02,120 --> 00:08:04,480 About that gender of AI was never off the table. 153 00:08:04,760 --> 00:08:09,440 It was always about pursuing it in a thoughtful kind of way. 154 00:08:10,120 --> 00:08:14,080 And and so that that's what we've done and we've implemented 155 00:08:14,080 --> 00:08:20,080 it in ways that are less likely to create issues. 156 00:08:20,880 --> 00:08:23,040 I think Tim Cook's giving a subtle jab at Google. 157 00:08:23,200 --> 00:08:26,280 We know that Google felt a lot of pressure to rush out their 158 00:08:26,280 --> 00:08:30,120 Gemini AI generator and the image generator generated a lot 159 00:08:30,120 --> 00:08:34,080 of crazy images, historical images of black Nazis and things 160 00:08:34,080 --> 00:08:36,320 that didn't even make sense. It was embarrassing for Google. 161 00:08:36,600 --> 00:08:39,320 They had to retract it from the market and pull it off, and 162 00:08:39,320 --> 00:08:41,080 they're revising it and working on it. 163 00:08:41,320 --> 00:08:44,400 But I think Tim Cook is trying not to make the same mistake. 164 00:08:44,720 --> 00:08:47,120 They've, of course looked at what Google did, rushing out 165 00:08:47,120 --> 00:08:49,720 with a product before it was really ready and rigorously 166 00:08:49,720 --> 00:08:52,720 tested, and Apple's taking a more conservative approach. 167 00:08:53,000 --> 00:08:54,680 And this is again, what Apple does. 168 00:08:54,720 --> 00:08:57,800 They're never first to anything. They never really invent 169 00:08:57,800 --> 00:09:00,040 anything. They just do things that already 170 00:09:00,040 --> 00:09:02,360 exist a bit better than everyone else. 171 00:09:02,800 --> 00:09:06,160 How so? How so will things that you, if 172 00:09:06,160 --> 00:09:08,720 you think about the kinds of things that we talked about, we 173 00:09:08,720 --> 00:09:14,520 talked about personal context and we talked about privacy. 174 00:09:14,800 --> 00:09:20,040 And so we're not waiting for a comprehensive privacy 175 00:09:20,040 --> 00:09:23,520 legislation regulation to come into effect. 176 00:09:23,520 --> 00:09:26,920 We're we already view privacy as a fundamental human right. 177 00:09:26,920 --> 00:09:30,920 And so that's the way we that's the lens that we see it at. 178 00:09:32,600 --> 00:09:37,320 And given that we're doing those things, personal context and 179 00:09:37,320 --> 00:09:42,520 privacy, we wanted to integrate it at a deep level so you're not 180 00:09:42,520 --> 00:09:47,000 having to think, oh, well, now I want to do something that uses 181 00:09:47,000 --> 00:09:49,440 intelligence. We put it into the apps that 182 00:09:49,440 --> 00:09:52,400 you're already using and integrated it deeply. 183 00:09:53,200 --> 00:09:57,600 They've deeply integrated Apple intelligence and privacy. 184 00:09:58,040 --> 00:10:01,000 Now, of course, he's talking to a tech reviewer here, and he's 185 00:10:01,000 --> 00:10:04,160 talking to customers of Apple, potential customers of Apple. 186 00:10:05,000 --> 00:10:08,320 He's selling this as a benefit because it's privacy, right? 187 00:10:08,600 --> 00:10:10,600 But there also is another aspect to this. 188 00:10:10,920 --> 00:10:13,560 Apple says repeatedly, Tim Cook has said repeatedly in the 189 00:10:13,560 --> 00:10:17,000 presentation and here again, that they are deeply tied 190 00:10:17,000 --> 00:10:20,120 together. Privacy and Apple intelligence 191 00:10:20,120 --> 00:10:24,120 are tied together, meaning that if you break them up, that you 192 00:10:24,120 --> 00:10:27,360 no longer have the privacy that's integrated with Apple 193 00:10:27,360 --> 00:10:29,680 intelligence. I believe that the 2nd and 194 00:10:29,680 --> 00:10:33,360 hitting meaning of this privacy is to defend Apple from onerous 195 00:10:33,360 --> 00:10:36,680 regulation, from potentially breaking up their ecosystem. 196 00:10:36,920 --> 00:10:41,080 I've said before repeatedly that the entire Moat of Apple is the 197 00:10:41,080 --> 00:10:43,800 ecosystem. In the case of Apple, the Moat 198 00:10:43,800 --> 00:10:45,400 and the ecosystem are synonymous. 199 00:10:45,600 --> 00:10:48,000 They go hand in hand. If you break up the Moat, if you 200 00:10:48,000 --> 00:10:50,320 break up all the apps, if you make it so the device doesn't 201 00:10:50,320 --> 00:10:53,280 run with its core integrated software, then it's basically 202 00:10:53,280 --> 00:10:55,480 just like a commodity. It's a hardware seller. 203 00:10:55,800 --> 00:10:58,840 So the integration in the ecosystem go hand in hand. 204 00:10:59,120 --> 00:11:02,840 And what Tim Cook's doing here is tying the ecosystem and the 205 00:11:02,840 --> 00:11:07,600 deep integration to privacy. That way, if the regulator say 206 00:11:08,160 --> 00:11:11,040 Apple's a monopoly and we need to break up Apple, we need to 207 00:11:11,040 --> 00:11:13,640 separate all of these applications from all of these 208 00:11:13,640 --> 00:11:16,040 integrations and we need to untie things. 209 00:11:16,120 --> 00:11:19,120 Tim Cook and Apple will then say, well, you can do that. 210 00:11:19,120 --> 00:11:22,240 You can break the integration from all of our apps and force 211 00:11:22,240 --> 00:11:25,080 us to break everything out into different segments. 212 00:11:25,360 --> 00:11:28,480 But if you do that, we can no longer ensure the privacy of our 213 00:11:28,480 --> 00:11:30,920 customers. Instead, they'll be sending data 214 00:11:30,920 --> 00:11:34,280 to all sorts of various third party applications of which will 215 00:11:34,280 --> 00:11:36,560 have no control over the privacy. 216 00:11:36,920 --> 00:11:40,040 So he is forcing regulators to make a choice. 217 00:11:40,520 --> 00:11:43,880 Either they let Apple continue with their deeply integrated 218 00:11:44,040 --> 00:11:49,240 ecosystem slash Moat, or they break up the Moat and ecosystem 219 00:11:49,440 --> 00:11:53,160 and sacrifice customers privacy. So the genius of this huge 220 00:11:53,160 --> 00:11:57,160 intense focus on privacy from Apple is it serves two major 221 00:11:57,160 --> 00:11:59,960 purposes. It's not only desirable for 222 00:11:59,960 --> 00:12:03,360 customers, they want privacy on their devices, but it also 223 00:12:03,360 --> 00:12:06,600 defends them against regulation. I think this is one of the best 224 00:12:06,600 --> 00:12:09,080 moves that Apple has done because one of the primary 225 00:12:09,080 --> 00:12:12,280 concerns I've had for Apple is regulation and having their 226 00:12:12,280 --> 00:12:15,360 ecosystem broken up. So I really, really like the 227 00:12:15,360 --> 00:12:17,840 direction Apple's going. I actually think it's, it's just 228 00:12:17,840 --> 00:12:20,240 so smart. It it's so smart, the hidden 229 00:12:20,360 --> 00:12:21,760 things they're doing with their company. 230 00:12:23,440 --> 00:12:25,360 Yeah. I think also now there's a lot 231 00:12:25,360 --> 00:12:29,280 of talk about it now that there is generative AI, a lot of 232 00:12:29,280 --> 00:12:32,320 people have, I mean Apple's notorious for never sending 233 00:12:32,320 --> 00:12:34,440 anything to the cloud. Everything's on device because 234 00:12:34,440 --> 00:12:38,040 that is the most secure way to do it and was applauded for it. 235 00:12:38,400 --> 00:12:40,640 Interestingly, this is a little bit different now with a lot of 236 00:12:40,640 --> 00:12:44,080 these larger models, more complex requests, you actually 237 00:12:44,080 --> 00:12:46,600 do have to go off the device. So you've developed, when I get 238 00:12:46,600 --> 00:12:48,840 the name right, private? Cloud Compute. 239 00:12:49,400 --> 00:12:51,840 Explain this to us because I think the the general chatter 240 00:12:51,840 --> 00:12:55,560 online is well, they have to be sending data to open AI for 241 00:12:55,560 --> 00:12:58,280 example to get a request back from ChatGPT. 242 00:12:58,800 --> 00:13:01,600 Well, there's private cloud compute, and then there's the 243 00:13:03,480 --> 00:13:06,440 arrangement with open AI. These two things are different. 244 00:13:07,520 --> 00:13:10,600 Distinguishing those two things is really important, and this 245 00:13:10,600 --> 00:13:13,800 next, this next part of this, I think they're going to go into 246 00:13:13,800 --> 00:13:16,200 where I think Apple's making their next big move. 247 00:13:16,480 --> 00:13:19,480 And this is another, somewhat hidden move that Apple's making. 248 00:13:19,800 --> 00:13:25,480 And so if you look at private cloud compute, we're utilizing 249 00:13:25,480 --> 00:13:30,400 the same silicon, not the same silicon, but the same basic 250 00:13:30,400 --> 00:13:34,520 architecture as the silicon that's in the well, that's in 251 00:13:34,520 --> 00:13:40,680 the iPhone and, and, and we're using the same software. 252 00:13:40,680 --> 00:13:45,240 And so we, we believe that we've done it in such a way that it's 253 00:13:45,280 --> 00:13:50,840 as safe and secure and private in the private cloud compute as 254 00:13:50,840 --> 00:13:54,040 the device. And so we've really, we've 255 00:13:54,040 --> 00:13:58,760 really worked on this a a a lot and put a lot of wood behind 256 00:13:58,760 --> 00:14:03,760 that arrow to, to assure that if you're, if you're working on 257 00:14:03,760 --> 00:14:07,960 something that requires world knowledge, so you're out of the, 258 00:14:08,680 --> 00:14:15,400 the domain of personal context and so forth, then you, you may 259 00:14:15,400 --> 00:14:18,960 want to go and use one of the large language models that are 260 00:14:18,960 --> 00:14:22,080 on the market. And we we selected what we feel 261 00:14:22,080 --> 00:14:24,920 is the best one. So that's the distinction. 262 00:14:24,920 --> 00:14:26,840 And I think that was really smart by Apple. 263 00:14:27,280 --> 00:14:30,520 It would have been nice to have open AI deeply integrated into 264 00:14:30,520 --> 00:14:32,480 the ecosystem and a part of Apple. 265 00:14:32,680 --> 00:14:35,400 But then that brings in the huge question, do you really want 266 00:14:35,440 --> 00:14:38,480 open AI to have all of your data and know everything about your 267 00:14:38,480 --> 00:14:41,600 contacts and your photos? Most people would say no. 268 00:14:41,640 --> 00:14:44,360 Most people would say, I don't really trust Sam Altman, you 269 00:14:44,360 --> 00:14:46,480 know, someone that came on the scene just a couple of years ago 270 00:14:46,680 --> 00:14:49,640 with that level of data. So they're not doing that. 271 00:14:49,880 --> 00:14:53,200 They have Apple intelligence, which is deeply secure and 272 00:14:53,200 --> 00:14:54,920 private from what he's saying here. 273 00:14:54,920 --> 00:14:56,440 It's just as private as your phone. 274 00:14:56,880 --> 00:15:00,240 And that's what has knowledge about your context, about your 275 00:15:00,240 --> 00:15:02,120 messages, your photos and all that stuff. 276 00:15:02,480 --> 00:15:06,000 And then you have the option to go outside of your context and 277 00:15:06,000 --> 00:15:08,800 hand off questions to open AI. And that's a completely 278 00:15:08,800 --> 00:15:11,880 different thing than Apple intelligence with Open. 279 00:15:11,960 --> 00:15:16,920 AI and ChatGPT, but you'll make a conscious decision to do. 280 00:15:17,240 --> 00:15:20,120 That every time, every time. So you you can guarantee that 281 00:15:20,120 --> 00:15:22,640 there will never be any data sent to open AI without your 282 00:15:22,640 --> 00:15:24,280 explicit user. That's right. 283 00:15:24,680 --> 00:15:26,240 That's right. So we know that Apple 284 00:15:26,240 --> 00:15:29,280 Intelligence knows your personal context, your photos, your 285 00:15:29,280 --> 00:15:32,120 messages, and all of that. That's Apple intelligence. 286 00:15:32,320 --> 00:15:34,760 And then the handoff to open AI is entirely different. 287 00:15:34,960 --> 00:15:36,680 That's for things outside of the world. 288 00:15:36,680 --> 00:15:38,520 That's things where you're answering different questions 289 00:15:38,800 --> 00:15:41,480 and you have a nice little warning that you're going to 290 00:15:41,480 --> 00:15:44,560 Open AI with those queries. So those are two distinct 291 00:15:44,560 --> 00:15:47,080 things. Now Apple stresses and Tim Cook 292 00:15:47,080 --> 00:15:49,800 stresses in this interview, the privacy aspect. 293 00:15:50,040 --> 00:15:52,000 This is going to be really private, and it's just going to 294 00:15:52,000 --> 00:15:55,400 be a nice relationship with Open AI where they can answer some of 295 00:15:55,400 --> 00:15:58,600 your questions in a seamless way without registering an account. 296 00:15:58,960 --> 00:16:01,320 So that's nice from Apple, but I think there's an entirely 297 00:16:01,320 --> 00:16:05,720 different aspect to this. This is a new default position 298 00:16:05,800 --> 00:16:08,000 for Apple. Think about this for a minute. 299 00:16:08,400 --> 00:16:13,120 Open AI is the defaulted LLM. It's the defaulted position to 300 00:16:13,120 --> 00:16:15,520 be the default hand off. When you have these questions 301 00:16:15,840 --> 00:16:18,720 that are for LLMS. Now, they mentioned in the 302 00:16:18,720 --> 00:16:22,560 presentation that they're open to having different LLMS. 303 00:16:22,960 --> 00:16:26,400 At some point, they might have four or five to pick from, but 304 00:16:26,400 --> 00:16:27,600 there's going to be a ranking order. 305 00:16:27,720 --> 00:16:31,480 If you have Open AI and Perplexity and Gemini, and then 306 00:16:31,480 --> 00:16:35,040 this other LLM and this other one which gets to be defaulted, 307 00:16:35,080 --> 00:16:37,960 how is Apple going to pick the default LLM? 308 00:16:38,520 --> 00:16:40,240 Well, I think it's going to be financially driven. 309 00:16:40,560 --> 00:16:43,200 I think in large part it'll be financially driven. 310 00:16:43,440 --> 00:16:46,400 We already know the potential value of defaults. 311 00:16:46,400 --> 00:16:50,200 The value of being the default search engine in Safari is $20 312 00:16:50,200 --> 00:16:52,600 billion per year, according to Google. 313 00:16:52,680 --> 00:16:55,280 Google's willing to write this big of a check every single 314 00:16:55,280 --> 00:16:57,160 year. That grows every single year. 315 00:16:57,360 --> 00:17:00,320 It's probably closer to 25 billion in 2024. 316 00:17:00,680 --> 00:17:03,280 And they're willing to do so because they see the value in 317 00:17:03,280 --> 00:17:06,359 defaults. And Apple just created a new 318 00:17:06,359 --> 00:17:10,200 default position instead of with search, it's with LLM. 319 00:17:10,319 --> 00:17:12,839 So now Apple has two default positions, the one with their 320 00:17:12,839 --> 00:17:16,480 Safari search engine that Google currently owns, and the one with 321 00:17:16,520 --> 00:17:20,200 LLM that Open AI currently owns. What is the one with Open AI 322 00:17:20,200 --> 00:17:23,000 worth? Potentially worth, I don't know. 323 00:17:23,079 --> 00:17:25,680 I can't say, but I think it's got to be worth something. 324 00:17:25,680 --> 00:17:28,200 Just looking at these numbers and that the default search 325 00:17:28,200 --> 00:17:31,240 engine is worth 20 billion, I have to imagine that being the 326 00:17:31,240 --> 00:17:35,960 default LLM and the data and exposure and different flow you 327 00:17:35,960 --> 00:17:38,680 get of data from that is worth something. 328 00:17:38,960 --> 00:17:43,040 Whether it's $100 million or billion dollars or $5 billion, I 329 00:17:43,040 --> 00:17:45,360 can't say. But I think that Apple just 330 00:17:45,360 --> 00:17:49,040 created a new default position, which could be highly lucrative 331 00:17:49,400 --> 00:17:52,000 based on other default positions and what companies are willing 332 00:17:52,000 --> 00:17:54,800 to pay for that flow and that data and that partnership. 333 00:17:55,160 --> 00:17:57,640 I think this could be another highly lucrative 1. 334 00:17:58,000 --> 00:18:00,440 So they're starting off with open AI, but they could 335 00:18:00,440 --> 00:18:03,000 eventually have a bidding war. They could have other companies 336 00:18:03,000 --> 00:18:06,400 bid to be the default LLM hand off with Apple. 337 00:18:06,880 --> 00:18:09,320 So this is another, I think, somewhat sneaky thing that 338 00:18:09,320 --> 00:18:12,120 Apple's doing. Again, they have the privacy 339 00:18:12,120 --> 00:18:14,200 aspect of this. If you don't want to use an LM, 340 00:18:14,200 --> 00:18:16,160 you don't have to. You can just use Apple 341 00:18:16,160 --> 00:18:19,760 Intelligence, which knows all your context and personal stuff. 342 00:18:19,960 --> 00:18:23,400 But they have this new potential money maker with another default 343 00:18:23,400 --> 00:18:27,160 position to be that LLM. So Apple is finding new ways to 344 00:18:27,160 --> 00:18:29,680 grow through their massive distribution. 345 00:18:29,680 --> 00:18:32,440 So again, when I study this presentation overall, and I view 346 00:18:32,440 --> 00:18:34,880 how it impacts Apple and the hidden things they're doing 347 00:18:34,880 --> 00:18:37,920 behind the scenes, I can see that there's a lot of thought 348 00:18:37,960 --> 00:18:40,640 going behind this. They are really combating 349 00:18:40,640 --> 00:18:44,680 regulation, tying privacy to their ecosystem, and they're 350 00:18:44,680 --> 00:18:46,520 finding new ways to generate money. 351 00:18:46,720 --> 00:18:49,640 They're both incentivizing upgrades of their devices, where 352 00:18:49,640 --> 00:18:53,120 only 5% of users right now have access to Apple Intelligence. 353 00:18:53,360 --> 00:18:55,960 They're going to get the other 95% to upgrade. 354 00:18:56,320 --> 00:18:58,360 And then they also have the default position that they 355 00:18:58,360 --> 00:19:01,600 created with the LLM, which as we've seen from Google, can be 356 00:19:01,600 --> 00:19:04,240 highly lucrative. So Apple's covering a lot of 357 00:19:04,240 --> 00:19:06,720 different things with one presentation and I just thought 358 00:19:06,720 --> 00:19:08,320 it was impressive. I thought they did a really good 359 00:19:08,320 --> 00:19:09,640 job. Now I want to talk about my 360 00:19:09,640 --> 00:19:12,680 history with Apple stock because I've bought a lot of this stock 361 00:19:12,680 --> 00:19:14,240 and I've recently trimmed some of this stock. 362 00:19:14,480 --> 00:19:16,760 I want to go through and kind of give some context here. 363 00:19:16,800 --> 00:19:19,320 Apple's a position I've held since early 2018. 364 00:19:19,320 --> 00:19:22,320 It's one of the O GS in My Portfolio and I've overall done 365 00:19:22,320 --> 00:19:26,000 a lot of buys and a few trims. But right now the position is a 366 00:19:26,000 --> 00:19:32,640 total of $47,392.00 and 30,580 of that is gains. 367 00:19:32,880 --> 00:19:36,120 So right now the majority of the position is gains. 368 00:19:36,200 --> 00:19:38,840 I first started buying it in 2018, but it was only with a 369 00:19:38,840 --> 00:19:41,440 small amount of money. My Portfolio was small overall. 370 00:19:41,680 --> 00:19:43,600 Apple was just one of the many positions. 371 00:19:43,960 --> 00:19:47,920 But it was 2020 during the COVID pandemic when I really decided 372 00:19:47,920 --> 00:19:51,600 to jump into Apple. I sold $20,000 worth of bonds 373 00:19:51,840 --> 00:19:53,760 and I bought a lot of Apple in 2020. 374 00:19:53,920 --> 00:19:56,120 This was at around $90.00 per share. 375 00:19:56,120 --> 00:19:58,640 So I bought $20,000 at $90.00 per share. 376 00:19:59,080 --> 00:20:01,600 And then I continue to hold. Apple traded up a little bit. 377 00:20:02,000 --> 00:20:06,040 And then in April 30th of 2021, Apple had a big dip. 378 00:20:06,360 --> 00:20:09,240 During that dip, I decided to buy more of it, especially in 379 00:20:09,240 --> 00:20:12,240 June of 2021. That's when it traded down to 380 00:20:12,240 --> 00:20:15,120 around 1:20. So I increased my position about 381 00:20:15,120 --> 00:20:19,000 double at that time period. These two large buys of $20,000 382 00:20:19,000 --> 00:20:22,960 hair and $20,000 hair are really what grew my Apple position. 383 00:20:23,200 --> 00:20:25,720 So that's what made it into a big position, hugely in the 384 00:20:25,720 --> 00:20:28,160 green. Now I've done some trims along 385 00:20:28,160 --> 00:20:30,160 the way. Some of them have been good and 386 00:20:30,160 --> 00:20:33,120 some of them have been poor. One of the trims I did recently 387 00:20:33,240 --> 00:20:35,760 was a poor trim. I trimmed it at 180. 388 00:20:36,040 --> 00:20:38,960 So I trimmed it just before this big 20% run up. 389 00:20:39,280 --> 00:20:41,360 That was a bad move. I should have held on to it. 390 00:20:41,720 --> 00:20:44,440 I was getting a little bit concerned about how aggressive 391 00:20:44,440 --> 00:20:46,320 the EU regulations were with Apple. 392 00:20:46,680 --> 00:20:48,960 The valuation had gone up to around a 30 PE. 393 00:20:49,280 --> 00:20:53,000 The EU was being incredibly aggressive with the regulations 394 00:20:53,320 --> 00:20:55,520 and I decided to take a little bit off the table. 395 00:20:56,040 --> 00:20:58,920 Apple has manoeuvred, I think, really well since then and the 396 00:20:58,920 --> 00:21:01,480 stock has moved up to well above $200.00 per share. 397 00:21:01,960 --> 00:21:05,360 So over this time period I've done a couple really good buys 398 00:21:05,400 --> 00:21:08,240 and I've also added to it at different times that I think 399 00:21:08,240 --> 00:21:09,880 we're good. And then I've done a couple of 400 00:21:09,880 --> 00:21:12,920 trims that I think were decent and one trim that I think was 401 00:21:13,000 --> 00:21:14,920 bad. I wish I could undo that trim if 402 00:21:14,920 --> 00:21:16,920 I could. That's my trading history with 403 00:21:16,920 --> 00:21:19,080 Apple. If we look at it overall, I have 404 00:21:19,080 --> 00:21:23,480 $29,500 of gains. That's market gains and another 405 00:21:23,480 --> 00:21:27,240 $1032.00 in dividends earned. So that's the combined gains of 406 00:21:27,240 --> 00:21:30,200 my Apple position. And this is in the passive 407 00:21:30,200 --> 00:21:32,920 income portfolio. There's another portfolio where 408 00:21:32,920 --> 00:21:36,200 I've held Apple for a couple years and I've sold out of the 409 00:21:36,200 --> 00:21:38,400 entire holding. That's in the story fund. 410 00:21:38,400 --> 00:21:40,040 So this is a different portfolio. 411 00:21:40,040 --> 00:21:44,360 It's only worth $230,000. Around 70,000 of that is gains. 412 00:21:44,720 --> 00:21:47,680 Now if we look at the story fund, I don't hold Apple in it 413 00:21:47,680 --> 00:21:50,600 currently because I recently sold out of the position. 414 00:21:50,760 --> 00:21:52,240 But I want to show you this sell. 415 00:21:52,240 --> 00:21:54,360 This is the trade I did with Apple and the story fund. 416 00:21:54,360 --> 00:21:58,560 December 11th 2023 I sold Apple and bought Netflix. 417 00:21:58,920 --> 00:22:03,000 So that was December of last year and I sold Apple at a price 418 00:22:03,120 --> 00:22:06,200 of $193.00. So that seems like a bad sell 419 00:22:06,200 --> 00:22:07,800 because Apple went up after selling it. 420 00:22:07,800 --> 00:22:09,600 But we also have to pay attention to what I bought. 421 00:22:09,840 --> 00:22:12,840 I bought $2500 of Netflix at the same time. 422 00:22:13,040 --> 00:22:16,560 Netflix's stock price at the time of this trade was $464. 423 00:22:16,640 --> 00:22:20,760 And if we go back to that day, Netflix is up 42% since that 424 00:22:20,760 --> 00:22:22,760 day. So Netflix has gone up a lot 425 00:22:22,760 --> 00:22:24,280 more than Apple during that trade. 426 00:22:24,320 --> 00:22:27,040 So overall, Apple's been a position that I've never sold 427 00:22:27,040 --> 00:22:29,200 for less than I've bought it. Every single buy I've done at 428 00:22:29,200 --> 00:22:32,200 the company has been accretive. I've made money on all of them. 429 00:22:32,560 --> 00:22:34,880 Now, there's been some trims that have been really good where 430 00:22:34,880 --> 00:22:37,800 they've been accretive to my performance and some trims where 431 00:22:37,800 --> 00:22:40,400 I trimmed it too low or I trimmed it too early and it's 432 00:22:40,400 --> 00:22:41,920 been detrimental to my performance. 433 00:22:42,040 --> 00:22:44,880 But overall, given the entire track record here, this has been 434 00:22:44,880 --> 00:22:47,760 a big winning position that's outperformed the markets. 435 00:22:47,760 --> 00:22:48,920 Now, that's going to be it for now. 436 00:22:48,920 --> 00:22:51,960 If you want to see additional content, exclusive episodes and 437 00:22:51,960 --> 00:22:55,080 have access to qualtrum.com, you can check out the Patreon in the 438 00:22:55,080 --> 00:22:57,680 link in the description below. Other than that, I'll see you 439 00:22:57,680 --> 00:22:58,160 next time.