Apple close to finalizing OpenAI deal to power iPhone’s AI capabilities: report

Apple (NASDAQ: AAPL) is edging close to finalizing a deal with OpenAI to leverage ChatGPT in its upcoming iOS, Bloomberg reports.

Apple has been in talks with AI leaders, including Google (NASDAQ: GOOGL), Anthropic, and OpenAI, for months. Set to launch iOS 18 next month, the iPhone maker intends to make AI one of the biggest upgrades to keep up with rivals like Samsung and Huawei, who have been offering AI features for months.

Bloomberg now reports that OpenAI is close to agreeing on a deal to make it the first company whose AI model will be available to iPhone and MacBook users.

BREAKING: Apple is finalizing a deal with OpenAI to power some Generative AI features — like a chatbot — for the new iOS this year. Talks with Google to integrate Gemini are ongoing but no deal has been reached. https://t.co/8CqoiLM2uO

— Mark Gurman (@markgurman) May 11, 2024

Quoting undisclosed sources, Bloomberg reported that the Cupertino-based giant is still in talks with Google, although those discussions aren’t close to a new deal. Google’s AI already powers some of the iPhone’s biggest rivals, including Samsung’s Galaxy S24 series.

For Apple, navigating AI is a high-stakes game. The company’s products are famed for privacy, which AI could compromise. To combat the threat, the company will seek to process as much on-device as possible.

This will require the new devices to be equipped with powerful processors for AI computations. The company has taken the first step towards this by releasing the M4 chip, which powers the new iPad Pro. iPhone 16, which launches later this year, will be the first iPhone equipped with AI-focused chips.

According to Bloomberg, Apple’s AI strategy is two-pronged: the on-device and cloud-powered LLM features will be powered by in-house technology, while chatbots and other sophisticated features like text-to-image generators will be powered by OpenAI, Google, and Anthropic; the latter two depend on the ongoing discussions.

“Apple isn’t building its own chatbot but knows the market wants it, so it’s going elsewhere for it. It’s the same playbook as search,” says Bloomberg’s Mark Burman, who spoke to sources at Apple.

With search, Google reportedly forks out $18 billion a year to remain the default search engine for Apple’s devices. While the deal is mutually beneficial, Microsoft CEO Satya Nadella told a court last year that it was also a peace treaty as Apple fears Google could sabotage its products if the iPhone maker backs out.

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