By Aditya Soni and Max A. Cherney

(Reuters) -Apple unveiled a long-awaited AI strategy on Monday, integrating its new "Apple Intelligence" technology across its suite of apps including Siri and bringing OpenAI's chatbot ChatGPT to its devices.

In the nearly two-hour long presentation at Apple's annual developer conference, executives including CEO Tim Cook touted how voice assistant Siri would be able to interact with messages, emails, calendar, as well as third party apps. Siri will be able to write emails and change the tone of voice to suit the occasion.

Long known for a focus on user safety, the iPhone maker also signaled it plans to differentiate itself from rivals Microsoft and Google by placing privacy "at the core" of its features.

But Wall Street - looking for more dazzling AI features and reassurance that would put Apple in good standing to compete on AI with market-leader Microsoft - was lukewarm on the event. Apple shares closed down nearly 2%.

Apple's stock, which trails those of other Big Tech firms this year, had rallied 13% last month in the run-up to the event.

"There isn't anything here that propels the brand ahead of its as-expected trajectory of incrementalism," said Dipanjan Chatterjee, analyst at Forrester.

"Apple Intelligence will indeed delight its users in small but meaningful ways, it brings Apple level with, but not head and shoulders above, where its peers are at."

Apple's approach contrasts with the enterprise-first focus of its rivals. The company hopes these moves will convince its more than 1 billion users - most of whom are not tech aficionados - on the need for the nascent technology.

Apple executive Craig Federighi called Apple Intelligence "AI for the rest of us."

Apple still remains overly reliant on sales of the iPhone and some analysts said any boost from the new AI features was unlikely to materialize in the short term.

"In this early race, it feels that Alphabet, and even more so Microsoft, are in better shape following their initial moves and with thanks to their cloud assets," said Paolo Pescatore, analyst and founder of PP Foresight.

The AI features announced at Apple's Worldwide Developers Conference will come with the latest operating system for its devices, which were also demonstrated at the event.

Apple uses the event at its Cupertino, California, headquarters each year to showcase updates to its own apps and operating systems as well as to show developers new tools they will be able to use in their apps.

SIRI REVAMP

The revamped Siri will have more control, helping it do what has proven tricky in the past because the assistant needed to understand the user's exact intentions as well as how the app works.

Siri will also tap ChatGPT's expertise and seek permission from users before querying the OpenAI service as part of Apple's tie-up with the Microsoft-backed startup, a privacy feature that Apple emphasized.

But the tie-up immediately sparked questions over privacy.

Tesla CEO Elon Musk said on X that he would immediately ban Apple devices at his companies if the iPhone maker integrates the startup's tech at the OS level.

The ChatGPT integration will be available later this year and other AI features will follow, Apple said, adding that the chatbot could be accessed for free and that users' information will not be logged.

Later on Monday, Apple released a paper detailing how its features, including those powered by OpenAI would ensure safety of customer data. This includes handling more complex tasks by Apple's servers under a new offering called Private Cloud Compute.

Apple also said it plans to add technology from other AI companies on its devices amid reports that it was discussing a potential tie-up with long-time search partner Google.

To power the AI features, Apple plans to use a combination of on-device processing and cloud computing. That means the AI features will only be available on the latest iPhones starting with iPhone 15 Pro, as well as upcoming models.

The company, which has long opposed cloud processing of consumer data over privacy concerns, said its approach would offer more privacy protections as it plans to use in-house chips in data centers come baked with security features.

Analysts have said that the use of its own chips could also help Apple avoid spending on Nvidia's pricey chips.

Apple said the new iOS 18, the software powering its flagship device, will make the iPhone home screen more customizable.

It will come with a "lock an app" feature that will help people protect sensitive information. Users can opt to lock specific apps and keep data more tightly controlled in the OS.

The company is also making its mixed-reality headset Vision Pro available in eight more countries including China and Japan. The new VisionOS 2 software for the headset will use machine learning to create natural depth photos and come with new gestures.