Weird, their models are open source so Apple could struck a deal to run them on their own servers if they’re so concerned.
Open Source does not mean "do whatever you want with it". Open source tech still comes with licensing agreements. Apple could not just embed any open-source tech into their operating systems without adhering to those licenses.
But it sounds like Apple was more concerned with the available data and how Meta was planning to use it internally. For example, if an Apple user did a query, Meta could capture that query without the user's knowledge. That's a valid privacy concern for Apple.