Apple Inc (AAPL  ) has initiated preliminary discussions with Baidu Inc (BIDU  ) about incorporating the Chinese company's advanced generative artificial intelligence (AI) technology into Apple devices within China, signaling Apple's determination to expand its AI capabilities further.

In seeking a local AI model provider for its operations in China, Apple is aligning with Chinese regulations that mandate generative AI models to undergo scrutiny by the nation's cyberspace regulator before public release, the Wall Street Journal reports.

Apple's engagement in these exploratory talks with Baidu while also considering partnerships with global AI leaders like Alphabet Inc (GOOG  ) (GOOGL  ) Google, and OpenAI.

China's significant role in Apple's global operations was underscored by CEO Tim Cook's recent activities, including the inauguration of Apple's most important overseas store in Shanghai.

Previous reports indicated Apple's efforts to diversify its supply chain base beyond China as geopolitical tensions intensified between the U.S. and China.

iPhone struggled with its China sales numbers despite offering discounts as Huawei Technologies gained ground fueled by nationalist sentiment.

The U.S. sanctions on China are already taking a toll on the biggest AI beneficiary, Nvidia Corp (NVDA  ), a prominent AI chip supplier to Apple.

Further, Apple's relations with Baidu would pose a double whammy for the U.S. chip designer, who has already lost out on its clients, like Baidu, to Huawei.

Price Action: BIDU shares are trading lower by 0.18% at $101.50 on the last check Friday.