What the Apple-OpenAI Deal Means for Four Tech Titans

Deal strengthens OpenAI’s position, raises questions about startup’s relationship with Microsoft—and is a setback for Google

By Deepa Seetharaman, Aaron Tilley and Miles Kruppa. Wall Street Journal. June 11, 2024.

OpenAI’s deal with Apple is shaking up the competitive balance in the artificial intelligence race.

The new agreement, announced Monday, gives the startup an important role in Apple’s push to bring AI to its vast population of users. At the same time, Apple rival Microsoft—OpenAI’s MSFT 1.12%increase; green up pointing triangle most important big tech partner—is also trying to make headway in consumer AI. The OpenAI-Apple collaboration deals a setback to Google, which has long paid Apple billions of dollars a year to be its default tool for internet searches.

The deal helps strengthen OpenAI’s position at the forefront of the generative AI boom and marks a win for Chief Executive Sam Altman. Weeks before he attended Apple’s announcement on Monday, Altman was at a Microsoft developer conference where “Microsoft Loves OpenAI” flashed on a screen with the word “love” represented by a blue heart.

Here is a look at what the news means for key players.

What it means for Apple

Using OpenAI gives Apple a chance to bring artificial intelligence to the masses. It may also help Apple sell more phones and restore the reputation of its voice assistant, Siri, as it develops its own AI models.

Apple shares surged 7% Tuesday to $207.15. Its market value jumped by $215 billion—its largest ever one-day gain—to a record closing high of $3.176 billion.

OpenAI’s role with Apple is limited. It will handle some functions that Apple’s own AI can’t, such as answering more complex queries or composing messages, with permission from the user. The OpenAI deal rated only about two minutes in Apple’s nearly two-hour presentation Monday at its annual developer conference.

Apple said it would integrate its new personalized AI system, dubbed Apple Intelligence, with other AI models, including products developed by Google. Apple is also in discussions with other AI providers, said people familiar with the matter.

Yet, being featured at the Apple event also gave OpenAI a chance to be touted by the world’s most successful consumer technology company as the leader in generative AI—implicitly endorsing it over Google, which has paid Apple as much as $20 billion a year to be its default search engine and is the biggest competitor to OpenAI and Microsoft.

“We wanted to start with the best,” said Craig Federighi, Apple’s head of software, on Monday, adding that OpenAI “represents the best choice for our users today.”

The deal clearly got under the skin of one OpenAI competitor: Elon Musk. He set up xAI last year to compete with OpenAI and has sued the startup, which he co-founded, for allegedly veering away from its original mission by giving priority to profit over benefiting humanity.

“It’s patently absurd that Apple isn’t smart enough to make their own AI, yet is somehow capable of ensuring that OpenAI will protect your security & privacy!” Musk said on X. He threatened to bar Apple devices from his companies if OpenAI technology is integrated into Apple operating systems.

Apple said its user information won’t be shared with ChatGPT, which runs on OpenAI servers. OpenAI can’t fingerprint user requests or see all the queries they make.

What it means for Microsoft

Microsoft has invested more than $13 billion into OpenAI for what is essentially a 49% stake in the earnings of its for-profit arm. The resources allowed OpenAI to develop some of the world’s most powerful AI tools. OpenAI’s technology helped Microsoft leapfrog rivals in the AI race.

The terms of the partnership allow both parties to strike deals with other companies.

The Apple deal raises questions about the state of the OpenAI-Microsoft partnership, what kind of exclusive access Microsoft has to OpenAI’s technology, and how