Apple is looking to acquire AI chip companies as part of an effort to reduce its dependence on Nvidia for demanding AI workloads, according to The Information.
Apple currently handles some AI processing in its own data centers using its own chips, but relies on Nvidia hardware housed within Google Cloud for more demanding tasks, an arrangement that includes the Gemini model powering the overhauled version of Siri. Apple's own AI server chip, internally code-named Baltra, had been expected to ship this year but has been delayed, according to people said to be familiar with the project.
Apple has historically limited its acquisitions to deals in the hundreds of millions of dollars and avoided large purchases, but that approach appears to be shifting. In January, Apple completed its acquisition of Q.ai, an Israeli company specializing in interpreting speech through facial micromovements, paying close to $2 billion, second only to the $3 billion Apple paid for Beats Electronics in 2014.
Apple also signaled a change in financial strategy during its most recent quarterly earnings call, when CFO Kevan Parekh told analysts the company would no longer target "net cash neutral" status, a policy under which it had kept its cash reserves roughly in line with its total debt. Apple did not explain the reasoning behind the change, though the added flexibility could free up capital for larger acquisitions.
Apple is already reportedly pursuing acquisitions of AI companies that could help shrink AI models for more efficient use on iPhone.
It is also worth noting that Apple's own in-house chip design capabilities originated with an acquisition. In 2008, the company acquired PA Semi for $278 million, a deal that laid the foundation for the custom processors now used across many of its product lines.
Impending leadership transitions could also bring a more aggressive approach to dealmaking, with hardware chief John Ternus set to succeed Tim Cook as CEO in September, and chip executive Johny Srouji being given expanded responsibility over all of Apple's hardware engineering, in addition to semiconductors.
Apple's chip design team has traditionally focused on battery-powered mobile devices rather than the high-performance server chips required to compete with Nvidia, the dominant supplier of AI server hardware. That limitation became apparent during development of the revamped Siri, when engineers reportedly attempted to run Google's Gemini models on Apple's own server infrastructure but found that the chips, designed with Mac workloads in mind, could not handle a model of that scale. As a result, Apple was required to process portions of the new Siri's workload using Nvidia chips within Google's cloud infrastructure.
Acquiring outside chip expertise would complement work already underway internally. Apple is currently developing a server chip based on the M5 Ultra chip, according to Bloomberg, while a future M7 Ultra chip is reportedly intended to substantially improve AI performance to a level that could begin to rival Nvidia's Blackwell chip. The M7 Ultra is expected to support up to 1.5TB of memory, roughly double the capacity of M5 Ultra, though Bloomberg added that a server chip based on M7 Ultra is unlikely to be ready before 2029.
Acquisitions represent only one avenue Apple is pursuing to reduce its reliance on Nvidia. The Information first reported Apple's collaboration with Broadcom on an AI server chip in 2024, and Broadcom confirmed in a securities filing last week that the companies had extended that partnership through 2031.
