Apple’s Unique AI Capex Strategy Compared to Other Megacaps

While tech giants engage in a high-stakes race to construct sprawling data centers to fuel their artificial intelligence initiatives, Apple is charting a more deliberate and arguably, more sustainable course.

Instead of pursuing an aggressive procurement strategy for AI chips, Apple is strategically sourcing computing capacity from external partners. This nuanced approach was articulated by Chief Financial Officer Kevan Parekh during the company’s fourth-quarter earnings call on Thursday.

Notably, when Apple does deploy its own servers to underpin its AI software, it leverages internally designed chips – a departure from relying on industry stalwarts like Nvidia or AMD. This initiative is encapsulated in a service dubbed “Private Cloud Compute,” highlighting Apple’s focus on data privacy and control.

“I don’t envision us deviating from this hybrid model, where we effectively blend first-party infrastructure with the scalability and flexibility offered by third-party resources,” Parekh stated, underscoring the company’s commitment to a balanced approach.

Apple’s earnings announcement concluded a week dominated by financial reports from the tech sector. Alphabet, Microsoft, and Meta all unveiled their earnings on Wednesday, while Amazon followed suit on Thursday.

A common thread running through these reports was a planned surge in capital expenditures, aimed at securing the computational horsepower required to develop next-generation AI and cater to ever-increasing user demands.

Alphabet projected capital expenditure of approximately $92 billion for the year. Microsoft reported a significant investment of around $34.9 billion during the September quarter, with intentions to further escalate capital expenditure in fiscal year 2026.

Meta experienced market turbulence after CEO Mark Zuckerberg defended the company’s ambitious plan to invest roughly $71 billion in AI chips and related expenses in 2025. Amazon subsequently raised its 2025 spending forecast by 6% to $125 billion.

In stark contrast, Apple’s capital expenditure profile appears comparatively restrained.

For fiscal year 2025, which concluded in September, Apple’s capital expenditure totaled $12.72 billion.

However, even this figure represents a substantial 35% increase from the previous year, signifying Apple’s escalating investment in AI infrastructure. Parekh indicated expectations of further increases in the future. Analysts, leveraging data from FactSet, project Apple’s capital expenditure to reach $14.3 billion this year.

“In ’25, we incurred capital expenditure associated with establishing our Private Cloud Compute environment within our first-party data centers,” Parekh explained. Apple has recently commenced shipping these servers from a manufacturing facility in Houston, Texas.

Last year saw the introduction of Apple Intelligence, a suite of AI-driven tools operating on Apple’s proprietary chips. These tools offer functionalities such as notification summarization, image generation for personalized emojis, and seamless integration with OpenAI’s ChatGPT for intricate queries.

Apple Intelligence has garnered mixed reviews, with its flagship feature, an enhanced Siri assistant, experiencing a delayed rollout until 2026, according to a company announcement in May. Apple affirmed on Thursday that the improved Siri remains on track for its revised debut next year.

Despite concerns that Apple’s distinctive AI strategy might jeopardize hardware sales, this has yet to materialize.

Apple CEO Tim Cook informed CNBC’s Steve Kovach that consumer response to the iPhone 17 models has been exceptionally positive, and the company projects overall sales growth of 10% to 12% in the December quarter. Apple executives conveyed enthusiasm regarding the new iPhone’s popularity during a conference call with analysts.

Nevertheless, Apple acknowledges that AI features, such as Apple Intelligence, are increasingly influencing consumer purchasing decisions in the smartphone market.

“We are optimistic that it will become an even greater factor in the future,” Cook asserted.

Apple’s “hybrid” approach entails that a portion of its AI-related computing expenses are categorized as operating expenses rather than capital expenditure. This has led analysts to scrutinize Apple’s operating expenses, which rose by 11% to $15.91 billion in the past year.

“We are augmenting our investments in AI, while concurrently investing in our product roadmap,” Parekh clarified. “The vast majority of the increase in operating expenses stems from research and development.” This strategic allocation highlights Apple’s commitment to both near-term AI capabilities and long-term product innovation.