Apple is shopping for chip companies because its own AI servers can’t keep up

Apple is actively seeking acquisitions of AI chip startups after its internally designed M2 Ultra servers proved inadequate for powering its AI features, forcing it to rely on Nvidia chips in Google's cloud. The iPhone maker, which rarely makes large acquisitions, has approached bankers and chip startups about potential deals as its own server chip, codenamed Baltra, has slipped to 2029. Apple's finance chief has signaled a willingness to spend more by dropping the company's long-held cash neutrality goal, freeing up its $45.6 billion cash pile.

Apple built a trillion-dollar business on chips it designs itself. It cannot design the ones its AI needs fast enough, so it is going shopping. The iPhone maker is hunting for AI chip acquisitions, The Information reported https://www.theinformation.com/articles/apple-hunts-ai-chip-acquisitions . In recent months it has talked to bankers about deals and approached chip startups to ask if they would sell. That is a rare move for a company that almost never buys big. The reason is a problem Apple cannot hide. Its own AI servers, which run on internally designed M2 Ultra chips, are struggling. The heavy lifting behind the new, Gemini-powered Siri https://thenextweb.com/news/apple-siri-google-gemini-nvidia-privacy-wwdc runs instead on Nvidia chips inside Google’s cloud. Apple tried to use its own machines for the job, and they were not up to it. The chip that slipped Apple has a server chip of its own in the works, codenamed Baltra. It was due this year. It slipped. Bloomberg reports that a chip powerful enough to rival Nvidia may not land until 2029, with an M5 Ultra upgrade filling the gap. Buying its way to the answer would break Apple’s habits. Its biggest deal ever was the $3bn Beats purchase in 2014. It built its entire chip empire off a much smaller buy: PA Semi, for $278m in 2008. Even this year’s spending looks modest next to its rivals. Apple paid about $2bn for the Israeli AI startup Q.ai, its second-largest deal on record. A more open wallet Two things suggest Apple is ready to spend more. Its finance chief, Kevan Parekh, told analysts the company would drop its long-held goal of holding as much cash as debt. That frees up money, and Apple sat on $45.6bn of it at the end of March. The other is people. Tim Cook hands the chief executive job to hardware boss John Ternus in September, and chip chief Johny Srouji now oversees all of Apple’s hardware. Both are engineers, and both may be readier to buy their way out of a bind. Still leaning on others Acquisitions are only one route. Apple is also in talks with PrismML https://thenextweb.com/news/apple-prismml-on-device-ai-compression-iphone , a startup that shrinks big AI models to run on an iPhone. And it just committed to $30bn of chips from Broadcom https://thenextweb.com/news/apple-broadcom-30-billion-us-chipmaking , a partnership it extended to 2031 https://thenextweb.com/news/broadcom-apple-extend-chip-deal-2031 . All of it points the same way. Apple wants off Nvidia, and clear of the wider memory and hardware squeeze https://thenextweb.com/news/apple-mac-mini-price-dram-ai-shortage reshaping the industry. Designing its own silicon is the long game. Buying someone else’s might be the shortcut. For a company that guards its independence, needing either is the real story. Get the TNW newsletter Get the most important tech news in your inbox each week.