John Ternas, senior vice president of hardware engineering at Apple Inc., at an Apple event in New York, USA, on Wednesday, March 4, 2026.
Adam Gray | Bloomberg | Getty Images
apple Despite sitting on the sidelines for most of the artificial intelligence boom, the company has maintained its dominance in consumer devices and built a $4 trillion market cap. But investors won’t remain patient forever and will be looking to new CEO John Tarnas for a clearer strategy when it comes to playing in the hottest market on the planet.
Apple announced Monday that Tim Cook’s 15-year term as CEO will end on September 1st. Ternus, the longtime head of Apple’s hardware division, will take over as the company’s second leader since Steve Jobs stepped down in 2011, less than two months before his death from cancer.
With Cook’s departure, Apple faces a number of challenges, including a supply chain complicated by geopolitical tensions and soaring memory prices due to unprecedented demand from increased AI. But for Tarnas, perhaps the most important aspect of his new job will be pushing the company deeper into the AI space, where it has lagged many of its big-cap peers.
So far, Apple’s AI strategy has included avoiding large capital investments. microsoft, google, Amazon and meta They are pledging hundreds of billions of dollars in annual capital spending to fund new data centers and equip them with expensive AI chips. When it comes to developing basic AI models, Apple is also looking to get involved and rely on Google’s Gemini to power its AI capabilities instead. This includes a major upgrade to Siri, which is scheduled for later this year after delays.
In 2024, Apple launched Apple Intelligence, which includes an image generator, text rewriter, ability to summarize push notifications, and integration with OpenAI’s ChatGPT. Despite mixed consumer reaction, Apple continues to sell iPhones in large numbers, and users have access to more AI options from other companies alone on these devices.
ChatGPT and Anthropic’s Claude are currently the two most popular free iOS apps, with Gemini in 4th place and Meta AI in 8th place. Meanwhile, Apple is betting that a large number of workloads will be running on the chips inside its phones within a few years, and the company has been integrating AI-enabled silicon into its devices since 2017, so this will play to its strengths.
“By choosing a hardware leader in John Ternus, Apple may be showing that it still believes the future of AI will be run through tightly integrated devices, not just software,” said Timothy Hubbard, an assistant professor of management at the University of Notre Dame.
At the moment, Apple gets enough growth from iPhone sales. iPhone sales rose 23% year-over-year to $85.3 billion in the latest quarter, which the company attributed to strong sales of the iPhone 17 model launched in September.
Cook said at the time that demand for the iPhone was “just phenomenal.” The company is scheduled to announce its second quarter results next week. Cook will remain CEO of the report, but investors will have many questions about Ternas and where he sees Apple going.
AI-enabled hardware seems to be where the market is experiencing a combination of wearables, robotics, spatial computing, or perhaps something Apple hasn’t shown yet. In January, Bloomberg reported that Apple would accelerate development of three upcoming AI wearables built around Siri: smart glasses, pendants, and AirPods with cameras.
Apple also expects to launch a foldable phone, which Creative Strategies CEO Ben Bajarin called “the most important hardware moment in years.”
“I think the biggest question is what comes after the iPhone,” Bajarin told CNBC in March. “These are mature categories, and we don’t know what’s going to happen next, but we do know that it’s going to be some form of AI hardware.”
AI and services
Turnus, 50, will also face the challenge of driving AI into the services side of Apple’s business. The company relies on iPhone users paying subscription fees for AppleCare, iCloud and Apple TV+ services and using Apple Pay. When consumers upgrade to paid versions of ChatGPT, Claude, and other generative AI services and chatbots, Apple gets a cut.
Dipanjan Chatterjee, an analyst at Forrester, said that in the coming years, “the seas will be rough for Apple because of the profound changes in how consumers interact with technology, especially generative AI.”
Ternus also needs to decide whether to continue focusing on privacy or embrace AI-powered personalization. For Cook, Apple’s privacy-first approach to user data has long been a differentiator compared to other tech giants like Meta and Google, which specialize in helping brands target users with ads.
Deepwater Asset Management’s Gene Munster told CNBC’s “Closing Bell: Overtime” on Monday that his company recently added to Apple’s stock due to the promise of “personalized AI.”
“Apple has an opportunity to tell investors a very compelling story that they’re going to get this,” Munster said.
Apple didn’t mention AI anywhere in Monday’s press release announcing the CEO change. Rather, the section about Ternus focuses on his 25-year career with the company and his key role in “introducing multiple new product lines, including the iPad and AirPods, and many generations of products across the iPhone, Mac, and Apple Watch.”
But when the Ternus era begins in just over four months, it’s clear that AI will need to be at the forefront. And Notre Dame’s Hubbard said Apple will need to go back to its roots, at least when it comes to innovation.
“The very strengths that made Apple so dominant — its rapid innovation — are where Apple started, and maybe that’s where the company should go back to,” Hubbard said.
—CNBC’s Jonathan Vanian contributed to this report.
WATCH: Stay tuned for more hardware innovations from John Terrnus
