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It stores metadata—information that describes the files—and all the encryption keys on its own servers, while the file chunks are stored anonymously on S3 and Google Cloud (or elsewhere).

Federighi says Apple isn't sending all of your data to the cloud, instead it's only uploading the most important bits of information relevant to your Apple AI query.

Apple has updated its publicly available iOS security documentation to disclose that personal data associated with the company’s iCloud service is stored in cloud servers operated by Google ...