Microsoft, Google and other rivals raced ahead, and jittery with anticipation that the House that Jobs built would soon announce a category-redefining advance of the technology.
What they got at this week’s Worldwide Developers Conference was a clearly articulated but hardly revolutionary implementation of existing AI tools and use cases wrapped up into a very Apple-centric strategy, right down to the attempted rebranding of “artificial intelligence” as “Apple Intelligence.”
You can find the details on Apple Intelligence here. But the main goal of the strategy seems to be to turn AI into an iPhone feature rather than a standalone product or service. Its hallmark is to keep as much AI processing as is possible on the phone itself, which it does largely by limiting what you can do with Apple Intelligence.
It’s one bold stroke is the integration of OpenAI’s ChatGPT to handle AI tasks too compute-heavy to be handled on-device. It’s a risk for Apple in that it means relinquishing a measure of control over iPhone users’ data security. But it saves Apple from having to maintain the massive data centers needed to train and run a LLM while giving its users access to the latest AI technology.
Rather than disappointed with the limited strategy, however, Apple investors (of which I’m a very small example) ate it up, sending AAPL shares up more than 10% for the week in anticipation that it will drive future iPhone and iPad sales, which it might very well do.
Apart from Apple shareholders, though, the biggest winner here could be Microsoft. Although Apple reportedly will not be paying retail (or even wholesale) to outsource AI processing work to OpenAI, and the ChatGPT maker will not be given access to any iPhone users’ personal data, the arrangement does give OpenAI and its 49% owner Microsoft access to Apple’s massive iPhone user base. And while Microsoft won’t know who’s asking questions to ChatGPT it will at least gain insight into what they’re asking about, which are data it can use for other purposes, such as refining its Bing search algorithm.
And, while Apple won’t be paying OpenAI, OpenAI will be paying Microsoft for the cloud-computing service it provides for ChatGPT.
The deal’s biggest payoff for Microsoft, however, may be with regulators. Its ownership stake in OpenAI has come in for intense scrutiny from antitrust authorities in the U.S. and the European Union over concerns with the highly concentrated structure of the AI market. OpenAI’s independent ability to strike a major AI deal with Microsoft’s long-time rival, Apple, is likely to be Defense Exhibit 1 in any antitrust lawsuit regulators might bring over the Microsoft-OpenAI alliance.
According to reports, Apple will also gain some measure of proprietary access to OpenAI’s latest technology as part of the deal, making Microsoft’s current Most Favored Partner status appear somewhat less exclusive.
That’s not to say Microsoft is necessarily thrilled with development. But it’s definitely not a total loss.