Apple transforms from AI-laggard to potential AI-leader

Well, Apple may have shaken up the AI arms race after unveiling its AI system Apple Intelligence Get it AI this week and announcing a partnership with Open AI to integrate its technology into Apple devices. But where does that leave other mega caps like Microsoft? Deidrebos has been looking into that and keeping score in today's Tech Check Dee Tyler, this is a leaderboard that can turn on a dime. Apple is a perfect example of that, going from AI lager to potentially a leader in less than a week. Interesting in particular where that puts Microsoft, once seen as the early winner in Gen. AI. Bloomberg reports that Apple is not going to pay Open AI to use ChatGPT and instead believes that pushing it out to its hundreds of millions of devices is of equal or greater value. So Apple essentially getting for free what Microsoft spent some $13 billion on in Open AI investments and diluting that Open AI advantage for Microsoft. Now as a major open AI investor, though, Microsoft could, of course share in some of the gains that open up from this partnership. But it also raises questions about Microsoft's access to Open AI's technology and the future of its consumer AI ambitions. Microsoft declined to comment. But Open AI, meanwhile, is starting to look more like competition. The Information reports that the startup has more than doubled its annualized revenue to $3.4 billion since late 2023, most of that coming from Open AI subscriptions and API access. Only a small portion, they report coming from a cut of Microsoft Azure revenue, in part because Open AI is winning more enterprise deals. A few weeks ago, it signed its largest such deal with PwC, the accounting firm. Just a year earlier, PwC put out a press release saying that it signed a $1 billion AI deal with Microsoft. Microsoft wasn't even mentioned in the latest one, but of course, does benefit in a way. The same time, guys, Microsoft is not just sitting back, it's diversifying. CEO Satya Nadella has been amassing new AI talent, tools and technology. Remember, it recruited Sam Almonds longtime rival Mustafa Suleiman to lead their AI efforts. It's also signed deals with other AI darlings like Mistral and Coke here. Many people here in the Bay Area like to say, guys, it is still early days and this new leg though it is shaping up to be a fascinating web and entanglement of mega caps and generative AI startup darlings. It was interesting. I don't know dear, if you caught our discussion with Sam and Steve last hour, but they basically talked about how Apple has kind of done an end run around open AI by making it kind of the back office technology to Siri and open AI is not paying for even that privilege. So to the extent that open AI is a proxy for Microsoft, did Apple just kind of go one up on Microsoft here? You know, it kind of did because this is a very usable AI. It's not abstract. And by kind of just relegating ChatGPT to a feature, it made it look like a feature, not a stand alone product. And then Apple even went so far as to say we'll have other models available. It's kind of agnostic and it's what a lot of folks here talk about, the commoditization of these LLMS that cost hundreds of millions of dollars to develop. But in the end, if you're a consumer, they all kind of look the same, do the same thing as accessible as the next one. When am I going to start to see the dividends of this AI infrastructure in Apple products? Well, if there's a huge upgrade cycle, right, Tyler, I don't know which model of iPhone you have, but to begin with, it's only going to happen. It's only going to work on iPhone 15 Pros and then they're going to present us, give us a new model in September. And if the AI Apple intelligence works as well as it's supposed to, the hope is that this is going to restart a new Apple iPhone upgrade cycle. And that's how they're going to monetize it. But I see give away these things for free. You know, I'm embarrassed to say I don't. It's my secondary phone. I don't even know what Apple iPhone I have. I don't know either. I mean, it's something if you didn't buy it in the last year, then you probably can't use that for AI. Ah, I love that. Get you. Yeah, yeah. This charger won't work with this phone. I get it though.