Apple Hunts AI Chip Acquisitions to Power Its Servers
Apple is shopping for chip companies because its own AI servers can’t keep up.
The Challenge
Apple built a trillion-dollar business on chips it designs itself. However, its M2 Ultra chips are not fast enough for the demands of its AI needs, leading them to explore acquisitions.
The Reports
According to The Information, Apple has been in discussions with bankers and approached chip startups about potential sales. While unusual for the company, this move reflects a critical need to enhance its AI capabilities.
The Root Cause
Apple’s own AI servers, powered by M2 Ultra chips, are struggling. Nvidia chips inside Google’s cloud handle the heavy lifting behind new Siri features like Gemini-powered Siri.
Apple initially planned to use its own machines but found them not up to the task.
Apple’s Future Plans
The company is developing a server chip codenamed Baltra, originally scheduled for this year, but now delayed until 2029 at the earliest. An M5 Ultra upgrade may fill the gap in the meantime.
Changing Strategies
Historically frugal with acquisitions, Apple’s finance chief Kevan Parekh has indicated a shift in strategy, dropping the goal of holding as much cash as debt. With $45.6bn in cash at the end of March, the company now has more financial flexibility.
Additionally, the upcoming leadership change with Tim Cook handing over to John Ternus and Johny Srouji’s expanded role may signal a willingness to be more aggressive in pursuing acquisition opportunities.
Alternatives to Acquisitions
Acquisitions are not Apple’s only option. They are also exploring:
- talks with PrismML, a startup specializing in shrinking large AI models for iPhone use.
- A $30bn chip commitment from Broadcom extended through 2031.
The Bottom Line
Apple’s current situation highlights the growing importance of AI technology and the challenges associated with developing dedicated hardware to support it. Both acquisitions and strategic partnerships are potential paths to achieving their goals.