From the outside, it seems as if Apple and Tesla are fighting the same battle, but the numbers tell a completely different story. Behind the grand promises of artificial intelligence, each company operates under different calculations; one is opening a new revenue stream from within an existing empire, while the other is spending billions of dollars to build the future it is betting on. As both companies race to secure their positions in the AI arms race, the most important question remains: which of them actually knows how to turn this race into money? This is what we will answer in this article, where we examine who is struggling more to turn AI into a golden egg.
Apple and the AI Race
Apple and Tesla are not on the same path when it comes to turning artificial intelligence into a revenue source. While Apple is trying to integrate AI capabilities into an existing business ecosystem that already generates money, Tesla is moving toward building an integrated technical ecosystem that includes cars, robots, chips, and computing centers, which imposes huge costs and puts pressure on its profits.
However, Apple has an important advantage that helps it fund its ambitions in the AI race: the strength of its current business and its significant cash flows. The company recorded revenues of $109.42 billion, an increase of 16.4%, while earnings per share reached $2.02, exceeding analysts’ expectations of $1.89. The role of Apple’s services sector, which achieves a gross profit margin of 75.6%, stands out here. With this approach, Apple can fund part of its AI investments based on its existing business and services, rather than bearing the costs of building an entirely new ecosystem.
As you can see, Apple’s strategy is that it does not try to build AI itself; instead, it leaves the development of AI models to other companies, while focusing on owning the hardware and the ecosystem that customers use to run these technologies. This is what Tim Cook explained when he said that Apple has developed the best devices in the world for the AI experience, whether through Apple Intelligence and Siri AI or through AI services from other companies. In this way, other companies bear the cost of developing models and the risks of building AI technologies, while Apple benefits from selling devices and services and generating billions of dollars.
Of course, Apple’s strategy is not without risks. Rising memory costs may increase the cost of developing its devices and running AI features. Meanwhile, delays related to the launch of some services in the European Union may delay the company’s reach to a segment of users. Apple will also face another challenge with iCloud+ services, which is setting appropriate prices for AI-related features so that they cover their increasing operating costs without negatively affecting the profit margins of the services sector.
Tesla Chose the Harder Path
For Tesla, it reaps its profits from AI directly. The company is working on developing FSD self-driving technology, Robotaxi, and the humanoid robot Optimus, in addition to the chips, production plants, and computing infrastructure needed to run these projects. The number of active subscriptions to the FSD system has reached 1.48 million, an increase of 56%. However, this growth has not been reflected to the same extent in the financial results, as earnings per share reached about $0.33, compared to expectations of $0.54. The operating margin also fell to 1.4%, while free cash flow turned to negative $1.09 billion. At the same time, the company’s capital expenditures are expected to exceed $25 billion (capital expenditures are expenses used to purchase or improve a company’s assets).
You can immediately notice that Tesla is completely different from Apple. Revenue from AI technologies at Tesla goes directly to funding computing capabilities, factories, and ecosystem development. This means the company does not just generate revenue from the technology, but reinvests a large portion of it into building the infrastructure needed to expand it. It seems that Tesla’s ambition goes beyond just developing software for cars, as Elon Musk wants to own the chips, factories, robots, and the fleet itself. But he also acknowledged supply chain challenges, noting that some parts for the Optimus robot cannot be provided yet. Nevertheless, the world’s richest man made it clear that Tesla is not overly focused on reducing the cost of its investments because it is prepared to spend large sums on developing AI, robots, and the infrastructure needed for its future projects.
Who Will Turn AI into Profits?
Currently, Apple appears to be in a stronger position in terms of generating returns from AI because it can rely on existing cash flows and then add new services and features to an ecosystem that includes hundreds of millions of users.
This point becomes even more important as Apple continues to return money to its shareholders. The company spent $25.8 billion on share buybacks during the last quarter, coinciding with its increased spending on AI. As for Tesla, it does not pay dividends or carry out share buybacks, but is instead moving to arrange credit facilities that could allow it to borrow up to $30 billion.
For Tesla, the performance of Robotaxi will be one of the most important upcoming tests. The company says the number of miles driven by its self-driving taxis is growing by more than 10% weekly, but the most important question is whether this increase in trips will turn into real revenue, and whether Tesla will eventually be able to make a profit from every mile its self-driving cars travel.
From the perspective of shareholder returns, the gap is more evident in stock performance. Apple’s stock has risen 23.08% since the beginning of the year, while Tesla’s stock has fallen 17.6%. However, Tesla’s stock is still very high compared to the company’s current earnings, as its price is equivalent to about 346 times past earnings, compared to about 38 times for Apple’s stock, reflecting the high expectations investors have for Tesla’s future.
Ultimately, the success of AI does not depend on the strength of the technology alone, but on the company’s ability to turn it into a profitable business model. Here, Apple follows an approach based on leveraging its existing devices and services with as little direct spending as possible. Meanwhile, Tesla is betting on building an AI ecosystem from the ground up, even if it requires billions of dollars. Until Tesla can prove that its products are capable of generating actual profit, Apple’s model, which is less dependent on capital expenditure, remains the most clear in terms of generating returns from AI.
In your opinion, who has the advantage in turning AI into profits? Let us know in the comments!
Source:
Leave a Reply