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Why Apple is pouring money into virtual and augmented reality

Tim Cook, chief executive officer of Apple
David Paul Morris | Bloomberg | Getty Images
Tim Cook, chief executive officer of Apple

Whether or not the iPhone as we know it has a long-term future, Apple thinks that virtual and augmented reality does, and recent investing patterns at the company show how interested CEO Tim Cook is in the emerging technologies, said Piper Jaffray analyst Gene Munster in a report issued Tuesday.

Cook has made it clear that his interest in augmented reality is high, which Munster wrote should ease some investor concerns that Apple is moving too slow to develop new technology.

"We are high on AR for the long run, we think there's great things for customers and a great commercial opportunity," Cook said on last month's earnings call.

Still, since there's no widely adopted platform to power augmented reality experiences — at least not yet — smartphones are likely to continue to have a role, wrote Munster.

The Apple iPhone SE is introduced at an Apple event in Cupertino, Calif. on March 21, 2016.
Mark Neuling | CNBC
The Apple iPhone SE is introduced at an Apple event in Cupertino, Calif. on March 21, 2016.

Even Facebook CEO Mark Zuckerberg — a big Apple rival in augmented and virtual reality development — suggested on his company's July earnings call that wearables and smartphones will play a part in developing these new technologies. "Apple may be able to leverage the iPhone to innovate around augmented reality," said Munster.

The analyst has been bullish on virtual reality and augmented reality for some time, and his thesis appears to be playing out. The big tech companies continue to pour money into building or acquiring cutting-edge technology. Piper Jaffray analyzed LinkedIn hiring data over the past year and found that employee hires to staff growing teams working on augmented reality at Microsoft, Alphabet's Google, Intel and Apple all increased.

Microsoft has more than 524 employees working on augmented reality, and expanded its team by 38 percent since this time last year. Google has 340 employees tackling augmented reality, up 59 percent over last year. Intel has 233 employees working on augmented reality, doubling its team in an year and and Apple now has 218 employees working on augmented reality, up 18 percent in the past year.

Apple has been expanding research and development spending faster than revenue in recent quarters, as the company is likely investing significantly in self-driving cars (Project Titan) and virtual and mixed reality, Munster noted. Piper Jaffray expects research and development spending to increase 21 percent this year to $10.4 billion. Revenue is projected to decline 7 percent this year, Munster noted.

Google will likely spend $14 billion and Facebook will spend more than $5 billion on R&D in the same time period, Munster noted.

Here are the key augmented reality or mixed reality hires and deals Apple has made over the past three years, according to Piper Jaffray.