Apple's New CEO May Adjust Spending Strategy to Catch Up in AI

Barron's reported that John Ternus will officially take over as CEO of Apple (AAPL-US) in about two weeks. Investors should not be surprised if he adjusts the iPhone maker's spending strategy to enhance its AI software capabilities.

Ternus will succeed Tim Cook as CEO on September 1. Cook has served as CEO since August 2011 and is widely regarded as having performed exceptionally well during his tenure. According to Dow Jones market data, under his leadership, Apple's stock delivered a total return of 2,740%, and the company's market capitalization surged from $346.4 billion to $4.63 trillion.

Wamsi Mohan, an analyst at Bank of America Securities, wrote in a report on Thursday, "Cook transformed Apple from a company driven by a few product cycles into one that consistently generates growth, cash flow, customer loyalty, and innovation at massive scale and product complexity."

He noted that Cook primarily focused on expanding Apple's services business, building a highly sticky ecosystem that encourages customers to repeatedly repurchase products, and emphasizing privacy across its devices and platforms.

"We expect Apple's core business to remain largely unchanged under new CEO Ternus," Mohan said.

However, Ternus may change at least one long-standing strategy that has historically differentiated Apple from other major tech companies.

In April, when Apple announced its second fiscal quarter results, it declared it would no longer treat "net cash neutrality" as a formal goal, instead opting to evaluate cash and debt independently. Apple initially introduced the net cash neutrality plan in 2018. At the time, the company held $163 billion in "net cash"—cash and investments minus debt. To reduce this figure, Apple decided to return cash to shareholders through stock buybacks and dividends.

"Apple has abandoned its net cash neutrality target, and we believe this could signal an increase in R&D, capital expenditures, and larger-scale acquisitions," Mohan said.

He added that while increased spending and acquisitions were not priorities under Cook's leadership, the accelerating pace of innovation in the AI era may require the company to adapt to keep up.