Apple’s OpenAI partnership: A boost for Siri or a trojan horse for Microsoft?

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Apple unveiled a new partnership with OpenAI at its Worldwide Developers Conference (WWDC) today, promising to bring advanced artificial intelligence capabilities to the iPhone, iPad and Mac. But as the dust settles on Apple’s splashy keynote, the biggest story isn’t Apple’s full-throated embrace of AI — it’s the growing distance between Microsoft and its one-time AI darling, OpenAI.

Over the past year, Microsoft has been aggressively expanding its AI partnerships and initiatives well beyond OpenAI. The Redmond-based tech giant has inked multi-billion dollar deals with Hitachi to co-develop industry-specific AI solutions, with Mistral to create next-generation natural language models, and with a host of other firms to explore AI applications in healthcare, finance, manufacturing, and more. 

Microsoft is also investing staggering sums to train its own AI models in-house. The crown jewel is reported LLM named “MAI-1” built to directly compete with OpenAI’s language models, in addition to Microsoft’s smaller models in the Phi 3 family made specifically for enterprise applications. The implicit message in all this feverish activity is clear — Microsoft refuses to be solely dependent on OpenAI or any single partner for its AI ambitions.

OpenAI’s quiet power struggle precipitates strategic shift  

Microsoft’s AI diversification seems to have been precipitated, at least in part, by a quiet power struggle and leadership shakeup at OpenAI last year. Co-founder and CEO Sam Altman, the mercurial visionary who led OpenAI’s transformation from non-profit research lab to for-profit juggernaut, was abruptly ousted as CEO in late 2023. He has since been reappointed as CEO but not without lasting ripple effects.

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Key researchers like Ilya Sutskever, the company’s chief scientist and one of the foremost experts on machine learning, also headed for the exits amid reports of a toxic company culture and disagreements over OpenAI’s direction. As the original braintrust behind OpenAI scattered to the four winds, it seems that so too did Microsoft’s confidence in the startup as its primary and exclusive AI partner.

The changing calculus of the Microsoft-OpenAI relationship

Make no mistake, Microsoft and OpenAI still have deep ties and overlapping interests. Microsoft’s $1 billion investment in OpenAI in 2019, and additional $10 billion poured in since, bought the Redmond firm a hefty stake in OpenAI and uniquely favorable terms for accessing its coveted language models on Microsoft’s Azure cloud platform. 

The two companies also continue to collaborate closely on specific projects of mutual interest. OpenAI’s GPT models and other foundational technologies power several of Microsoft’s highest-profile and most strategic products, including the new Bing search engine (now dubbed “Copilot“) with its vaunted conversational AI capabilities. And Microsoft has gone out of its way to publicly defend OpenAI from critics who accuse it of recklessly pursuing artificial general intelligence at the potential expense of safety.

But the monogamous relationship between Microsoft and OpenAI that once looked so unshakable is starting to fray. OpenAI in particular seems determined to assert its independence and prove it won’t be constrained or steered by the agenda of any single backer — even a behemoth like Microsoft. 

Is OpenAI a trojan horse for Microsoft?

Which brings us to the blockbuster OpenAI-Apple partnership announced today. On the surface, the deal looks like a resounding win-win for both parties’ interests and ambitions.

For Apple, the tie-up promises a desperately needed shot in the arm for its lagging AI capabilities and a chance to leapfrog rivals like Google and Amazon. OpenAI’s GPT language model and other tools will be deeply integrated with Siri, Apple’s perennially underwhelming virtual assistant, which is set for its first major overhaul in years. A new developer framework dubbed “Apple Intelligence” will allow the iOS ecosystem to tap into OpenAI’s powerful generative AI models. OpenAI-powered features will be woven throughout Apple’s own apps and services, from iMessage to Photos to Maps, promising to make them radically more intelligent, intuitive and personalized.

For its part, OpenAI gets a privileged foothold in the iOS ecosystem, instantly putting its technology in the hands of hundreds of millions of Apple customers worldwide. It also gets access to the prodigious amount of data that flows through Apple’s products and services daily — a potential gold mine for further training and refining OpenAI’s models. And the deal surely comes with a hefty upfront payment and ongoing royalties that will help keep OpenAI’s lights on and its GPU clusters humming.

But to Microsoft CEO Satya Nadella, who has been steadily and stealthily working to extend Microsoft’s tendrils into every corner of the emerging AI ecosystem, the OpenAI-Apple partnership may represent an even more tantalizing opportunity. By nudging OpenAI into Apple’s warm embrace, Microsoft gets to turn its ostensible AI frenemy into a potential Trojan horse inside the walls of one of its fiercest competitors.

Any insights OpenAI gleans from the user data and interaction patterns of iPhone-toting masses will benefit Microsoft too, at least indirectly, given its still-sizable stake in the company. OpenAI’s growing influence in steering the product roadmaps of both Apple and Microsoft could help ensure the two tech titans’ AI efforts remain more complementary than adversarial. 

And in the worst case scenario for Apple, if its big bet on OpenAI ends up backfiring — whether due to underwhelming user adoption, embarrassing technical glitches, or wider disillusionment with AI hype — Microsoft can sit back and watch two of its largest rivals take a very public pie to the face.

Apple’s awkward AI adolescence

Where does this leave Apple and its suddenly full-throated embrace of all things AI? Despite its size, wealth and technical prowess, the Cupertino giant has long been perceived as lagging behind its Silicon Valley neighbors in AI sophistication. 

Sure, Apple made an early splash with Siri after acquiring the eponymous startup in 2010. But the virtual assistant quickly gained a reputation for unreliability and is now widely seen as inferior to rivals like Google Assistant and Amazon’s Alexa. Despite steady improvements over the years, interactions with Siri too often still devolve into a frustrating game of garbled voice messages, misunderstood intents and comically off-base results.

Prior to today, Apple’s response to the recent frenzy of AI excitement sparked by OpenAI’s ChatGPT and rivals like Google’s Gemini and Anthropic’s Claude has been muted to the point of radio silence. As competitors rushed to release chatbots, personal assistants, writing aids, and image generators powered by large language models, Apple seemed content to watch from the sidelines, leading some to wonder if it had any coherent strategy for the AI era at all.

That clearly changed with today’s WWDC announcements. But Apple’s belated lunge into the AI wars via the OpenAI partnership is not without risk or contradiction. Apple has long been a champion of privacy and an opponent of the rampant data collection its Big Tech peers rely upon to power their AI ambitions. While Apple insists OpenAI will respect its privacy principles, the details remain fuzzy.

Apple’s obsessive corporate culture of secrecy and siloed development also seems at odds with OpenAI’s more freewheeling, collaborative ethos. The two companies may find their engineers and product leaders speaking completely different languages, literally and figuratively. One possible omen: the Apple Intelligence developer framework will be completely closed source, unlike OpenAI’s open APIs.

All eyes on Microsoft as AI arms race heats up

For all the lingering questions and caveats around Apple’s incipient AI strategy, however, today’s OpenAI announcement undoubtedly raises the stakes in Silicon Valley’s AI arms race. And once again, all eyes turn to Redmond, and the relentless chess master Satya Nadella, to see what Microsoft’s next move will be as it works to press its early lead in all things AI.

Microsoft has spent the last several years and countless billions building an unrivaled AI war chest, with a vast web of alliances and an imposing in-house arsenal. For now its many initiatives are mainly in the R&D and pilot project stage, but the day is fast approaching when Microsoft could bring them to bear in a market-shaking way.

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