Apple’s announcement Monday that CEO Tim Cook will step down and John Ternus will take over signals a significant shift for Apple: The company is betting its future on the most rapidly evolving technology in the history of computing.

Apple is still flying high on the iPhone’s success, which helped it become one of the few publicly traded companies to reach a $4 trillion market value last year. Cook expanded the iPhone beyond a mere product into a foundation for new business segments like wearables, digital services and health.

Ternus will have to figure out Apple’s next path – and he’ll have to do it as AI reshapes technology and the way people use it every day. The bar for Apple is especially high given its track record of class-defining products, including the smartphone, smartwatches and tablets.

Apple has rolled out a suite of AI-powered features for the iPhone, Mac and iPad that can do things like erase unwanted objects from photos, summarize messages, generate images and translate languages.

But Apple has yet to lay out a broader AI strategy, such as how artificial intelligence will shape new products and make the company money.

At first blush Ternus might seem an odd choice for that AI future. His background is primarily in hardware, having joined the product design team in 2001 and eventually ascending to become the senior vice president of hardware engineering in 2021.

Yet while consumers interact with AI through software, Apple deeply links its hardware with its apps, services and operating systems. Apple’s chips are made specially for products like the iPhone and Mac, making them more power efficient and enabling certain features that are specific to Apple devices. Some other gadget makers use chips from vendors like Qualcomm or Intel, giving those device companies less control over features like the camera or power management, for example.

That means Ternus’ deep knowledge of Apple’s hardware could be hugely beneficial for its AI ambitions – especially as the company is reportedly working on new types of AI devices like Siri-enabled smart glasses, a pendant and AirPods with cameras, according to Bloomberg. What better person to lead Apple at a time when it may expand into new types of gadgets than the person who’s been leading its hardware engineering efforts?

Hardware innovation will be “the heart and lungs of Apple’s success” moving forward and could define Ternus’ legacy as the company’s leader, Dan Ives, who leads technology research for Wedbush Securities, said in a note Tuesday morning.

Ternus becoming the next CEO “means a lot of the path ahead has to do with hardware innovation,” Gil Luria, the managing director of D.A. Davidson, told CNBC. This way, Apple is letting other tech companies spend billions on AI-related capital expenditures, instead sticking to hardware – which will be key to the AI experience anyway. “The AI models will flow through their market-leading, premium hardware,” Luria said.

The next big thing

And Apple isn’t alone. The tech industry is racing to come up with the next hit product, betting that AI will lead to new ways of interacting with technology.

Qualcomm even developed a new chip for AI-enabled gadgets like pins and pendants, citing growing interest from tech companies. OpenAI is among the companies working on a new type of hardware product, and it’s tapped Apple’s former design chief Jony Ive to help create it.

Ternus is already leading Apple’s current hit products in new directions. In March, he spearheaded the launch of the MacBook Neo, its first low-cost MacBook, representing a shift in strategy for its laptop line. Apple also said the efforts of Ternus’ team were “on full display” with the introduction of the iPhone Air last year, which Apple had to engineer differently to achieve its thinner design.

The company is expected to release its first foldable iPhone this September, according to Bloomberg, potentially marking its biggest change to the iPhone since its inception – and possibly the first iPhone launch under Ternus.

Ternus’ extensive experience working on Apple products also makes him a safe choice in the short- and medium- term, Francisco Jeronimo, an analyst for the International Data Corporation, said in an email to CNN.

But Apple may need to think bigger in the long term. Apple must make bold choices about where its products are going in the age of AI or else it may risk becoming more of a platform for other AI services, Tony Fadell, the former Apple executive who co-created the iPod and helped lead the iPhone’s early development, told CNN in March ahead of Apple’s 50th anniversary.

Jeronimo also added that while Ternus is the right choice to succeed Cook, he will have to address broader questions about the company’s future.

“What Apple needs from Ternus now is not just technical execution but strategic conviction on AI,” he said. “The products will be fine. The platform question is the one that will define his legacy.” (CNN)