*Of Course* Apple is Investing in OpenAI
Back in May, I wrote a post attempting to read between the lines of what was going on with OpenAI and its key partner, Microsoft. Beyond the hedging investments (and acquisitions hiring) Microsoft was doing in the space, it felt like OpenAI teaming up with Apple for AI on the iPhone (still just rumored at the time) could up that tension significantly. Entitled, Will OpenAI Bite the Microsoft Hand That Feeds?, I also wondered if beyond gaining the reach the iPhone provided, if such a partnership wouldn't make sense for another reason:
Might we see Apple invest in OpenAI soon? I mean, definitely don’t be surprised!
Well, hope you weren't surprised (and you wouldn't be if you were a member of The Inner Ring, just saying). Sure enough, as Tom Dotan and Aaron Tilley report for The Wall Street Journal today:
Apple is in talks to invest in OpenAI, a move that would cement ties to a partner integral to its efforts to gain ground in the artificial-intelligence race.
The investment would be part of a new OpenAI fundraising round that would value the ChatGPT maker above $100 billion, people familiar with the situation said. The Wall Street Journal reported Wednesday that venture-capital firm Thrive Capital is leading the round, which will total several billion dollars, and Apple rival Microsoft is also expected to participate.
As noted in my newsletter today, Microsoft basically has to invest in the round, the optics of not doing so would be awful. They own 49% of the company – sorry, 49% of the profits of the company. Lol. The question is if it will be cash, which OpenAI needs, or credits for compute, which OpenAI also needs!
To be fair and clear, it's entirely possible that Microsoft wants to invest here. I mean, they own – er, own rights to the profits of, lol – a huge portion of what is right now the most important (and valuable) AI company in the world. And the OpenAI relationship was always a brilliant maneuver by Microsoft to allow them to benefit from the technology at an arm's length. And without the need to acquire the company (though they probably would have if they could have around the Sam Altman board coup). I don't think the two sides are in open war. I just believe things are... complicated. And getting more complicated by the day!
Apple investing hundreds of millions of dollars certainly won't help matters. But it sort of felt inevitable. Beyond my prediction in May, once that whole weird business happened with Apple almost getting a board observer role before it was yanked back (perhaps at the behest of Microsoft, which also gave up its observer role very quickly), it seemed pretty clear what was going on.
As I wrote at the time about the board position:
Normally, such deals don't involve access to board rights, so you have to wonder if there's something else behind the scenes here – the potential of a future financing perhaps?
And further down in a footnote...
You have to wonder if this was at Apple's request, in exchange for the key placement within Apple Intelligence and being slightly wary of where ChatGPT was heading – or if Sam Altman/OpenAI wanted to make sure Apple was kept close to ensure a good partnership even as Apple expands Apple Intelligence to other AI providers over time. Or, per above, does this point to an expanded Apple/OpenAI partnership over time, and/or a potential investment...
And just a few weeks ago, doubling down on the notion:
I still can't help but wonder if the whole Apple-in-the-OpenAI-boardroom thing wasn't related to an eventual investment from Apple (tied, of course, to their partnership announced at WWDC).
Having been in board rooms for the past decade-plus, I'd like to think I know how such things typically work. OpenAI was not going to let Apple into that room for nothing. And while yes, the iPhone partnership is something, it's not enough to warrant sitting in every single board meeting, learning basically everything about what the company is doing and how it operates. Especially when the person joining is a longtime and key Apple executive in Phil Schiller, no less.
Sure, Schiller may have had to recuse himself at times. But he was going to be in that room hearing most things, most of the time. That access doesn't come free. Or even cheap. I suspected there was some sort of handshake agreement on a next round of funding. Especially since he wasn't going to be joining the board until later in the year (presumably after that funding). The situation changed when Microsoft changed it.1 And here we are.2
Anyway, with Apple now on the verge of investing in OpenAI, you do have to wonder what it will mean for other would-be Apple Intelligence partners. Apple has not been shy about wanting more of them, even mentioning Google's Gemini by name at times. But will such partners now be shy about partnering with Apple when they have a literal interest (in the profits, if not the company, lol) in OpenAI succeeding above all others? Maybe Apple can invest in Google too?
Update August 31, 2024: Some further thoughts on the would-be investment...
M.G. Siegler
M.G. Siegler
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 It is possible that Apple got some regulatory inquiries/pushback on the report too. And it's even more possile that both things are possible!
2 And just to toot my own horn one final time, I tripled down on the notion of Apple investing in OpenAI with: "Perhaps OpenAI thought Apple could eventually be a new capital partner." Perhaps, indeed.