Apple weighs semiconductor acquisitions to strengthen Apple Intelligence: Report

Apple is reportedly in talks with investment bankers and semiconductor startups as it explores potential acquisitions to strengthen its AI server capabilities. According to The Information, the company has been evaluating semiconductor startups that could help boost its efforts to build server chips for running AI workloads.

Apple currently handles a portion of its AI processing in its own data centres using custom-designed chips. However, for more demanding AI tasks, it still relies on Nvidia hardware hosted within Google Cloud—an arrangement that reportedly includes powering the Google Gemini models used by the revamped version of Siri.

Apple's own AI server chip, internally codenamed Baltra, was expected to ship this year but has reportedly been delayed.

Historically, Apple has limited its acquisitions to deals worth a few hundred million dollars and has largely avoided blockbuster purchases. However, that strategy appears to be evolving.

In January, Apple completed its acquisition of Q.ai, an Israeli startup specialising in interpreting speech through facial micro-movements, for nearly $2 billion. The deal is second only to Apple's $3 billion acquisition of Beats Electronics in 2014.

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Apple also signalled a shift in its financial strategy during its most recent quarterly earnings call, when CFO Kevan Parekh told analysts that the company would no longer target a "net cash neutral" position—a policy under which it had kept its cash reserves roughly in line with its total debt. While Apple did not explain the reasoning behind the move, the added financial flexibility could free up capital for larger acquisitions.

The company is also reportedly evaluating AI startups that could help develop smaller, more efficient AI models capable of running directly on the iPhone.

Building Apple's AI infrastructure

Apple's history demonstrates that acquisitions have played a crucial role in shaping its chip strategy. In 2008, the company acquired PA Semi for $278 million, laying the foundation for the custom Apple Silicon processors that now power many of its products.

Upcoming leadership changes could also usher in a more aggressive approach to acquisitions. John Ternus, Apple's hardware chief, is expected to succeed Tim Cook as CEO in September, while chip executive Johny Srouji has reportedly been given expanded responsibility for all of Apple's hardware engineering alongside its semiconductor efforts.

Apple's chip design team has traditionally focused on battery-powered mobile devices rather than the high-performance server processors needed to compete with Nvidia, the dominant supplier of AI server hardware. That limitation reportedly became apparent during the development of the revamped Siri, when engineers attempted to run Google Gemini models on Apple's own server infrastructure. The chips, designed primarily for Mac workloads, were reportedly unable to handle AI models of that scale. As a result, Apple had to process portions of Siri's AI workloads using Nvidia GPUs within Google's cloud infrastructure.

Server chips and Nvidia alternatives

Acquiring external chip expertise would complement Apple's ongoing in-house efforts. According to Bloomberg, Apple is developing an AI server chip based on the M5 Ultra, while a future M7 Ultra is expected to deliver a substantial leap in AI performance, potentially bringing it closer to Nvidia's Blackwell architecture.

The M7 Ultra is reportedly expected to support up to 1.5TB of memory—roughly double the capacity of the M5 Ultra. However, Bloomberg reports that a server chip based on the M7 Ultra is unlikely to be ready before 2029.

Acquisitions are only one part of Apple's broader strategy 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 recent securities filing that the partnership has been extended through 2031.