Apple Inc. (AAPL.US) and Alphabet Inc. Class C (GOOGL.US) deepen their cooperation in artificial intelligence, with the demand for Siri computing power driving a new mode of server hosting.

The partnership between Apple Inc. (AAPL.US) and Alphabet Inc. Class C (GOOGL.US) is undergoing a significant transformation with the rapid development of generative artificial intelligence. Reports indicate that the two companies reached an agreement on licensing the Gemini model earlier this year, and this collaboration has now expanded into the cloud infrastructure domain. Sources revealed that due to the increased demand for computing power from the new generation Siri and Apple Intelligence, Apple Inc. is negotiating with Alphabet Inc. Class C to host and operate a server cluster specifically supporting Siri backend operations in Alphabet Inc. Class C's data centers. The sources mentioned that Alphabet Inc. Class C had previously conducted research on deploying servers within their data centers. Alphabet Inc. Class C plans to adhere to Apple Inc.'s strong privacy standards. The report highlighted that Alphabet Inc. Class C's cloud currently provides various key services to Apple Inc., including online data storage and training tasks for some of Apple Inc.'s internal AI models. At the infrastructure strategy level, Apple Inc. senior management has chosen not to invest significantly in building its own data centers from a financial perspective. Instead, they have adopted a hybrid cloud architecture, which integrates Apple Inc.'s private cloud resources with the cloud capabilities of Alphabet Inc. Class C, Amazon.com, Inc., and other third-party cloud service providers to create a flexible complementary digital infrastructure layout. This strategy reflects Apple Inc.'s need for "private cloud computing" infrastructure. Although Apple Inc. has always focused on building a closed-loop ecosystem, the current pace of expansion of its data centers is insufficient to fully meet the needs of global users in processing complex AI tasks. By selecting Alphabet Inc. Class C as their preferred cloud service provider, Apple Inc. can directly utilize Alphabet Inc. Class C's mature Tensor hardware accelerators for model inference and also reduce the costs of building their own computing centers. This "hybrid cloud" model, while ensuring business flexibility, also optimizes financial performance. Nevertheless, this deep cooperation has raised concerns in the market regarding privacy protection and technological sovereignty. As a brand with privacy protection at its core, how Apple Inc. implements its strict security protocols within the facilities of its competitors is a key aspect of the negotiations between the two parties. The current proposal leans towards a "hosted server" model, where Apple Inc. would run their own or customized hardware architecture within Alphabet Inc. Class C's facilities, with Alphabet Inc. Class C providing basic power and network bandwidth to balance cost efficiency and data security. This model not only allows Alphabet Inc. Class C to potentially earn up to $1 billion in annual revenue, but also strengthens its leading position in the AI infrastructure services market. Industry analysts believe that this collaboration is more of a "phase-level alliance." Apple Inc. has not abandoned its plans to develop its own AI server chips. Supply chain reports suggest that Apple Inc.'s high-performance AI chips are expected to enter mass production in the second half of 2026. This indicates that the current expansion of cloud services is a strategy adopted by Apple Inc. to alleviate short-term computing power shortages. Until Apple Inc. completes its full-stack self-developed journey from chip to cloud, the complex relationship of "competition and cooperation" with Alphabet Inc. Class C will likely become the norm for technology giants in the coming years.