Apple Inc. (NASDAQ:AAPL) could potentially partner with Chinese tech giants Baidu Inc. (NASDAQ:BIDU) and Alibaba Group Holding Ltd. (NYSE:BABA) for its AI features in China, according to tech analyst Gene Munster.

What Happened: Munster, who is associated with Deepwater Asset Management, suggested the potential partnerships in a post on Monday. He wrote on X, “What about Apple AI in China? If Apple wants to offer third party AI features (aka ChatGPT), they’ll likely do a deal with $BIDU (ERINE) or $BABA (Qwen)”

Qwen and Ernie Bot are AI models developed by Chinese tech companies. Qwen is a general-purpose language model like ChatGPT, while Ernie is a knowledge-enhanced model focused on specific domains.

Apple’s shares closed 1.91% lower on Monday following the Worldwide Developers Conference (WWDC) 2024, where the company unveiled new AI advancements.

At the WWDC, Apple introduced “Apple Intelligence,” a systemwide software update that promises a personalized generative AI experience.

The new iOS 18 allows for a more customizable iPhone home screen and includes enhanced versions of its in-house apps. Siri, the voice assistant, will now better understand natural language, process contextual information, and perform actions within apps.

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These AI features will be integrated with the latest device software, enabling users to summarize text and generate content such as personalized birthday animations. Privacy remains a core focus, with most AI processing happening on the device itself rather than in the cloud.

Apple also announced a partnership with Microsoft Corp‘s (NASDAQ:MSFT) OpenAI to bring ChatGPT to its devices and showcased the latest operating system for its Vision Pro mixed-reality headset and iPhone. Vision Pro will be available in eight additional countries, including China, starting in June.

Why It Matters: Munster’s suggestion of a potential partnership with Baidu and Alibaba comes at a time when Apple’s AI strategy is under the spotlight. The tech giant’s AI features, including the ChatGPT model, are expected to play a significant role in driving iPhone sales, potentially triggering a three-year upgrade cycle.

However, this integration of OpenAI at the OS level has also sparked controversy, with Elon Musk threatening to ban Apple devices from his companies, including SpaceX and Tesla, if the integration goes ahead. In this context, a partnership with Baidu or Alibaba could potentially offer Apple a smoother path to integrating AI features in China.

Price Action: Apple Inc closed at $193.12, down 1.91% on Monday. In after-hours trading, it dropped further by 0.41%, according to data from Benzinga Pro.

Read Next: Apple Integrates New ChatGPT Features In iPhone, Mac And iPad: Sam Altman Thinks ‘You Will Really Like It’

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote