There are many reasons Apple Inc.’s stock hasn’t been so hot lately, but a big one is that investors feel the company lacks a compelling “story” on artificial intelligence. By that they mean Chief Executive Officer Tim Cook doesn’t seem as if he had much of a plan.
Google, to its credit, does have an AI story. Unfortunately, it’s a tragicomedy. Caught on the hop by upstart OpenAI, its Gemini model is best known not for its intelligence but for its depiction of George Washington as a black man, the Pope as an Asian woman and other assorted embarrassments.
This is all to say: the BFFs — that’s best frenemies forever — need each other’s support right now. They have long been rivals as mobile platforms, but news about talks of a tie-up between the two, which would bring Google’s Gemini AI to Apple’s iPhone, is a deal that can solve short-term headaches for both companies.
The “GeminiPhone” — a nickname I hope sticks purely because I know Apple will absolutely hate it — will give Apple devices a taste of the cutting-edge AI customers will soon expect as standard and that developers are already demanding. Apple would have preferred, no doubt, to have built such capability itself, but without the huge server farms on hand to train models, it has been left behind (for now).
Google provides enhanced AI capabilities, albeit in a still highly experimental form, today. Details of the partnership haven’t been filled out, and it doesn’t yet seem to have been fully agreed upon. But it has similarities with Apple and Google’s deal on search, in which Google pays handsomely to be the default search engine on iOS devices. As in that arrangement, Google gets that one thing it’s always hungry for: scale. It might at first seem curious that Google isn’t planning to keep its AI to itself, making it exclusive to Android phones, but that runs counter to its long-established North Star of simply having as many users as possible.
By bringing Gemini to iPhone, it will not only get millions more potential users but affluent ones who might pay a premium to use advanced AI. More users means more data, and more data means a better, more valuable product.
Where this deal might differ from search, however, is that the BFFs are on a much more equal footing. Because of its laggard position, Apple needs Google’s AI in way it didn’t necessarily need Google Search. And so I would be surprised if Google ends up shoveling tens of billions of dollars into Apple’s hands for the privilege of being on the iPhone — especially not when it’s being sued by the Justice Department over that tactic for cementing its position in online search.
We also don’t know if this would be an exclusive deal and, given those antitrust concerns, it may be wiser for it not to be — AI partnerships between tech companies are already on regulators’ radars. According to Bloomberg’s Mark Gurman, Apple was also speaking to ChatGPT maker OpenAI, and it may well be interested in others. Though, like search, I wonder if users will pick one general purpose AI and mostly stick with it, making first-mover advantage as important as ever.
Which brings me to another thought: What is Apple giving up here? The company has shown in the past it has no qualms incorporating third parties, even rivals, when they offer great features Apple users might want (the first iPhone, you may remember, came pre-installed with YouTube).
But AI is surely not just a feature, but The Future — one which Apple won’t be satisfied with outsourcing for long. The company is, of course, working on its own AI projects, as described in a recently published research paper. You could imagine it would seek to shut out Google, and anyone else, as soon as it can do a good enough job itself.
As of Monday morning, investors in both companies seem delighted, sensing something of an answer to the Microsoft and OpenAI surge. For months now, Cook has been steadily reassuring investors, hinting at significant breakthroughs to be (maybe, possibly) announced at its coming developers conference in June. Expectations are already sky high.
Dave Lee is a Bloomberg Opinion columnist. Views do not represent the stand of this publication.
Credit: Bloomberg
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