In its highly anticipated Worldwide Developers Conference (WWDC) keynote on Monday, Apple (AAPL) revealed an artificial intelligence (AI) partnership with Microsoft-backed (MSFT) OpenAI. This strategic move could benefit Microsoft as a major investor in the ChatGPT maker and may potentially lead to Alphabet’s (GOOGL) Google Gemini being integrated into the iPhone.
As part of this collaboration, ChatGPT will be integrated into iOS 18, scheduled for release later this year. The new operating system will be available in the fall as a free software update for iPhone Xs and newer devices. Additionally, Apple Intelligence, a personal intelligence system, will be available in beta as part of iOS 18 on iPhone 15 Pro, iPhone 15 Pro Max, iPad, and Macs with an M1 chip or later. This integration is expected to supercharge Siri with enhanced natural speech abilities, personal context from on-device content, and in-app capabilities, significantly boosting the user experience.
Apple assured users that its devices would ask for permission before sending any data to an OpenAI server, emphasizing its continued commitment to privacy and security. This move aligns with Apple’s longstanding emphasis on user privacy, potentially attracting privacy-conscious consumers.
For Microsoft, this partnership with Apple is a unique opportunity. Since Microsoft is a major investor in OpenAI, it stands to benefit from the increased use and visibility of OpenAI’s technology. Microsoft’s strong position in the AI field, supported by its large investments in OpenAI, means it could gain a lot from this high-profile partnership.
Analysts from Wedbush pointed out the benefits of this collaboration, saying that putting OpenAI’s chatbot in the iPhone could boost growth and attract developers to both Apple and Microsoft platforms. They believe this partnership is a game-changer because it connects OpenAI with the world’s largest base of consumer devices.
Moreover, a closer relationship with Apple could be good for Microsoft, especially considering the ongoing legal case between the Department of Justice and Google. This situation might make Apple see Microsoft as a better cloud services partner, possibly strengthening their cooperation.
The partnership announcement also raised speculation about future AI integrations. Apple indicated plans to incorporate other AI models into its devices, which analysts from Bank of America suggested could lead to agreements with Alphabet’s Google or Amazon’s (AMZN) partner Anthropic. While this could benefit Alphabet, some concerns that increased AI usage could pose a threat to its search business. Bank of America analysts pointed out that ongoing technology partnerships for iOS could challenge Google’s long-term competitive moat, especially if OpenAI launches a search product in the second half of 2024. However, reports suggest that Google’s search contract with Apple extends through 2026, potentially securing its near-term search position on iOS.
This strategic partnership marks a significant milestone in the AI landscape, with Apple, Microsoft, and Google vying for supremacy. Apple’s shares soared to a record high in intraday trading on Tuesday, up over 6% at $204.78 as of 2:15 p.m. ET. Microsoft shares saw a 0.5% increase to $429.80, while Alphabet shares rose 0.3% to $175.52.
Apple’s partnership with OpenAI signifies a strategic effort to enhance its AI capabilities, potentially reshaping the competitive dynamics with Microsoft and Google. This collaboration is poised to drive significant advancements in AI technology that enhance consumer experiences.
