How Apple's AI Update Will Affect the Stock Market
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You probably saw the headlines around Apple's announcement of their latest update. Normally, Apple updates involve new emojis and cool upgraded features, but this update is a little bit different, with economic and geopolitical and privacy implications that reach far beyond the emoji animals you can select on your keyboard. Apple

is making a big push into AI with what they're calling Apple Intelligence. This isn't just a souped up Siri. These are features that can automatically organize your emails, transcribe and summarize audio, and actually generate custom emojis. So they still got their emojis updated there. Anyway, Apple also signed a deal to give users access to chat GBT in Siri. Someone was very

very mad about this, but more on that in a moment. These AI updates are rolling out in US English this fall with more languages and features coming next year. Sounds super exciting, right? But there is a catch or several when it comes to China.

China is a huge market for Apple, but it's also a tough one. Beijing has strict regulations on AI, which means Apple can't just roll out the same features in China as it does everywhere else. In fact, Apple was pretty quiet about its plans for China during their big AI announcement.

Why? Because they have to navigate a maze of Chinese regulations. And to be honest, it's unclear how Tim Cook is ever going to do that. But let's unpack the economic implications here. First, Apple's market share in China has been slipping.

In the first quarter of 2024, Apple held 15% of the market, which sounds pretty good, but it's actually down from 20% the previous year. This has implications for the broader stock market because Apple's market cap is a little bit over $3 trillion, but it's been going back and forth with Nvidia for the second largest company by market cap,

with Microsoft in first place, but by a small margin. The US equities market has a total valuation of about $40 trillion. That means Apple makes up about 7.5% of the total US stock market, and that gives this one stock a whole lot of influence over our investing world.

Meanwhile, Chinese phone manufacturer Huawei, despite being hit hard by U.S. sanctions, has bounced back and is now the top smartphone maker in China. Huawei and other local Chinese brands are also heavily promoting their own AI features, which puts even more pressure on Apple.

From a regulatory standpoint, China's rules around AI are stringent. For instance, any large language models which are used to create AI tech like ChatGBT needs approval from authorities. Additionally, generative AI providers must remove any quote illegal content. This poses a direct challenge for Apple because as I mentioned, ChatGBT plays a big role in Apple's new AI features and ChatGBT is banned in China.

To work around this, Apple might need to find a Chinese AI partner to provide similar functionality. Economically, what does this mean for Apple and the broader markets? Well, for Apple, the need to create localized AI solutions could slow down their rollout in China and increase costs.

And if Apple does nothing, its market share in China could continue to slip, which would hurt the company and therefore the US economy. For China, there's a bit of a balancing act here. On one hand, they want to control and regulate AI technologies with their borders.

On the other hand, there is a clear demand for advanced tech from its consumers. If Apple can successfully navigate these regulations, it could mean more high-tech jobs and investment in the Chinese economy. And what about the U.S.? Well, Apple's AI advancements are part of a broader tech race with

China. How Apple fares in China could impact its competitiveness globally. If Apple manages to crack the Chinese market with compliant yet innovative AI features, it could set a precedent for other tech companies facing similar regulatory challenges. This could enhance the U.S.'s position in the global tech landscape, driving innovation and economic growth.

Okay, it's time to talk about who's mad here. And it's Elon. Man, Elon cannot stay out of money rehab lately. Elon threatened to ban employees across all of his companies from using Apple products. He claims that he is considering a ban because he's worried about security and privacy issues with ChatGPT, calling it, quote, creepy software.

People were quick to point out, though, that Elon is developing a chat GPT competitor called Grok, and he might just be a little salty about Apple partnering with GPT instead of his AI software. But are his privacy concerns valid? Some people say no, because Apple users can opt in or opt out of chat GPT, and Apple says that no information is stored and minimal data is shared.

So the people that aren't all that concerned about the Apple ChatGPT collab say it's basically the same thing as using ChatGPT on your computer. But I do find that hard to believe. And I know the whole "our phones are listening to us" is sort of a conspiracy theory, but who among us hasn't said to a friend that they were thinking about buying something like new headphones and then an ad for headphones pops up the very next day?

I don't not believe it. And so if there are privacy blind spots in ChatGBT, having an app on our phones would give ChatGBT more data on us, like more location data for people like me who carry their phone with them more often than their computer. And of course, search, call and text data. And listen, I am not totally in Elon's camp either. I am not saying this is creepy spyware, but I am saying that I think we need to remember that typically

If a product is free, we are the product. And when it comes to the free version of ChatGBT, we need to ask ourselves, are we becoming the product? And if so, how?

For today's tip, you can take straight to the bank. It's expected that the iPhone 16 will be announced soon and released sometime this fall. The majority of Americans buy a new phone every two years or so, so if you're committed to those blue texts, then you'll probably have dropped between $500 and $1,500 on iPhones every two years. If instead of doing that, you just invested in Apple stock every two years since the first iPhone dropped, you'd have almost 100 grand now.

If you can buy an iPhone, you can buy Apple stock. And if you think Apple has a bright future in the US, China and beyond, see what index funds contain Apple stock and whether or not they're a good fit for you. Between summer vacations and going to the beach and having the hot girl or guy summer of your dreams,

season can be a little hard on our wallets. A Chime checking account helps you reach your financial goals while still enjoying the summer. You can take back your finances with features like fee-free overdraft up to $200 with SpotMe or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. And you know I hate overdrafted fees. One time I overdrafted buying a latte, which was so embarrassing at the time, but hey, it happened.

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Public is the brokerage I use for all my investing needs, whether I'm looking for stocks, ETFs, a high-yield cash account, options, and other assets, even music royalties. To build the multi-asset portfolio of your dreams, go to public.com slash money rehab. One more time, because trust, you will thank me, public.com slash money rehab. This is a paid endorsement for public investing. Full disclosures and conditions can be found in the podcast description.

Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.

Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.

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