MW Apple has an AI problem - and a Google partnership could actually make things worse

By Christine Ji

Partnering with Google's Gemini could erode Apple's brand and privacy, causing the iPhone maker to lose market share

Apple is reportedly exploring a partnership with Google's Gemini to enhance Siri.

As Big Tech companies compete with each other to provide the most advanced artificial-intelligence offerings, investors have been frustrated with Apple Inc.'s lack of progress.

So the news of Apple's $(AAPL)$ reported partnership with Google's $(GOOGL)$ $(GOOG)$ Gemini naturally gave some on Wall Street hope that the iPhone maker was finally getting serious about giving its customers access to AI capabilities.

However, such a partnership would only speed up Apple's demise in the AI race, according to Richard Windsor, founder of the research company Radio Free Mobile.

The idea that Apple would team up with Google to revamp Siri "is an indication of a worsening position," Windsor wrote in a note Tuesday, as the partnership would likely erode Apple's brand image and its emphasis on data security.

Apple is facing a lose-lose situation, Windsor believes. If Apple keeps Siri as is, it maintains its brand value but would be unable to compete with Google's Android phones in a scenario where AI agents on smartphones become a common phenomenon.

However, if Apple pursues a Gemini partnership, it risks lagging behind in the AI race as well, "because a customised version of Gemini will always be somewhat behind the state of the art, given the time that will be required to take the latest flagship model and customise it," according to Windsor.

In both of these scenarios, unsatisfied customers could eventually end up switching to Android, eating into Apple's market share.

However, the broader market seemed to take the announcement as a positive development. Apple's stock rose 1.3% last Friday, when Bloomberg reported on the potential partnership. However, Google was seen as the bigger winner, as shares of parent company Alphabet Inc. rose 3% to close at an all-time high of $210.52.

Apple's stock has been battered this year by trade-war and AI concerns, although it has taken a turn for the better in the past month. Shares of Apple are down 6.7% year-to-date, but have rallied 6.3% since late July.

Read on: Apple deserves some patience in AI, according to this analyst

The main reason why Apple has had such difficulty developing a differentiated AI product is because of its rigorous privacy policies, which are a key differentiating factor for its brand. Now, those same policies are making it difficult to train large language models, which process large swaths of data.

The AI issue hasn't become an existential risk for Apple yet, according to Windsor and Melius Research analyst Ben Reitzes, and Windsor pointed to "Google's puny market share in Pixel devices" as evidence.

Unlike Windsor, Reitzes isn't so concerned about Apple's AI standing. "Luckily for Apple, its iPhone base doesn't seem to care about the Siri/AI delays, and we see no evidence of real switching," Reitzes wrote in a note earlier this month.

In the meantime, the best path forward for Apple to preserve data privacy and enhance its AI capabilities would be to pursue an acquisition of an existing AI platform, Windsor believes. Earlier this year, Bloomberg reported that Apple was holding internal talks to purchase the AI startup Perplexity.

Investors will get a better understanding of Apple's AI strategy on Sept. 9, when the company will host an event widely expected to be the next iPhone launch. In a recent note, Bank of America analyst Wamsi Mohan encouraged investors to keep their eyes out for "further examples of AI integration and enhancements, including better integration with Apps and Siri."

"We will look for any signs of further integration of large language models for general queries," Mohan added.

Also read: Apple no longer innovates - it waits. And with AI, anyone playing it safe will get left behind.

-Christine Ji

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August 26, 2025 14:52 ET (18:52 GMT)

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