Apple isn't playing the same AI capex game as the rest of the megacaps

Core Insights - Apple is adopting a hybrid approach to AI, utilizing both its own chips and external computing capacity, contrasting with competitors who are heavily investing in AI infrastructure [1][2][4] - The company reported a significant increase in capital expenditures, up 35% year-over-year to $12.72 billion, with expectations to rise further to $14.3 billion [4][5] - Despite a different strategy in AI, Apple continues to see strong consumer demand for its products, particularly the iPhone 17, with projected sales growth of 10% to 12% in the upcoming quarter [7][8] Capital Expenditures - Apple spent $12.72 billion on capital expenditures in fiscal 2025, which is a 35% increase from the previous year [4][5] - Analysts predict that Apple's capital expenditures will increase to $14.3 billion this year [5] - The spending is primarily associated with building out the Private Cloud Compute environment in Apple's data centers [5] AI Strategy - Apple is focusing on its own chips for AI services, rather than relying on Nvidia or AMD [2] - The company has launched Apple Intelligence, a suite of AI tools, although it has received mixed reviews and some features have been delayed [6] - Apple's hybrid model allows some AI-related spending to be classified as operating expenses, contributing to an 11% rise in operating expenses to $15.91 billion [9] Market Response - Consumer response to the iPhone 17 models has been exceptionally positive, with CEO Tim Cook noting it was "off the chart" [7] - Apple executives believe that AI features will increasingly influence smartphone purchasing decisions [8]