AI: Apple could adopt 'The Daily Show' strategy with external AIs. RTZ #397

AI: Apple could adopt 'The Daily Show' strategy with external AIs. RTZ #397

Apple may be accelerating its discussions with LLM AI companies besides OpenAI, with whom it already announced an AI partnership. And it may be Apple’s version of a multi-party “Guest Host” strategy employed by ‘The Daily Show’, since the departure of Trevor Noah a while ago. That includes their recent return of TDS icon Jon Stewart to host on Mondays every week. Let me explain.

It’s been barely a few days since Apple’s ‘Apple Intelligence’ reveal at WWDC 2024, its emerging ‘Different AI’ strategy, and partnership with OpenAI on external LLM AI access as its first ‘Preferred AI partner’. Since then, Apple has gone out of its way to note that additional LLM AI partners are possible to be on-ramped into the Apple ‘Private Cloud Compute’ ecosystem that Apple is actively building. As an AI access pathway for AI products and services to its two billion plus global Apple device and services users.

Apple has specifically mentioned Google as partner (and LLM AI comnpanies like Anthropic and others), which makes sense given the two companies’ long-time economic partnership, with Google being the exclusive provider of Search services to Apple users via its Safari browser on Mac OS, iOS and other Apple platforms. And the directional flow of over $20 billion or more to Apple every year from Alphabet/Google to Apple.

Which is important given that Google is in the process of actively baking in its Gemini AI technologies into ‘AI Search Overviews’ and other aspects of Google Search and other platforms. And of course the expected array of AI for Search and other products expected from OpenAI, along with GPT-5 soon, and others over this year and next.

So it’s not a surprise when the WSJ reports that “Apple, Meta have discussed an AI partnership”, and joining the Apple line for external LLM AI partners:

“The longtime rivals have held talks about potentially integrating Meta’s generative AI model into Apple Intelligence.”

“In its hustle to catch up on AI, Apple has been talking with a longtime rival: Meta.”

“Facebook’s parent has held discussions with Apple about integrating generative AI model into Apple Intelligence, the recently announced AI system for iPhones and other devices, according to people familiar with the matter.”

“Meta and other companies developing generative AI are hoping to take advantage of Apple’s massive distribution through its iPhones—similar to what Apple offers with its App Store on the iPhone.”

A latecomer to generative AI, Apple has developed its own smaller artificial-intelligence models but has announced it will turn to partners for more complex or specific tasks. When Apple Intelligence was unveiled earlier this month at the company’s Worldwide Developers Conference, OpenAI’s ChatGPT was announced as the company’s first partner.”

“We wanted to start with the best,” said Apple software leader Craig Federighi, noting that ChatGPT “represents the best choice for our users today.” He also said Apple wanted to integrate Google’s Gemini as well.”

“In addition to Google and Meta, AI startups Anthropic and Perplexity also have been in discussions with Apple to bring their generative AI to Apple Intelligence, said people familiar with the talks.”

“If Apple strikes deals with partners beyond OpenAI, Apple said customers could choose which external AI models they want to use in addition to Apple’s internal systems.”

The piece goes onto note that these discussions may highlight an important variation of AI strategies amongst the big technology companies. Especially since Apple is the biggest pool of multi-billion users in a single place, that would be a huge pool of valuable personal data that could feed into the Inference/RAG data flows back into the major LLM AI companies, to further enhance their underlying AI models and services. As the WSJ goes onto explain:

“The discussions with Meta highlight the unlikely alliances that are forming between major technology companies in the artificial-intelligence era. OpenAI’s tech is set to be embedded in Microsoft and Apple devices. And an Apple and Meta deal would be noteworthy given how much the two companies have been at loggerheads over other emerging tech issues.”

“In its talks with other AI companies, Apple hasn’t sought for either party to pay the other, the people said. Instead, the AI companies can sell premium subscriptions to their services through Apple Intelligence. As it does on its app store, the iPhone maker would keep a cut of subscription revenue from its devices.”

“The discussions haven’t been finalized and could fall through. Even though deals with Apple would help AI companies obtain massive distribution of their products, it is unclear how much of a financial windfall it would be.”

“OpenAI will be offering a free version of ChatGPT through Apple Intelligence, but users can also link a premium ChatGPT account to their Apple device.”

“While ChatGPT usage is expected to double with the Apple partnership, OpenAI’s infrastructure costs are expected to grow 30% to 40%, said Gene Munster, a longtime Apple analyst and managing partner at Deepwater Asset Management. Munster expects 10% to 20% of Apple users will opt into paying for a premium AI subscription to a product like ChatGPT. That could mean billions of dollars for AI companies that integrate successfully with Apple’s new platform.”

“Distribution is hard to get,” Munster said. “The beauty of what Apple has built is that you’ve got this engaged distribution at scale.”

As I’ve outlined at length in these pages, the LLM AI companies are investing and building their models to the tune of tens of billions in LLM model training and development, AND associated AI GPU Cloud Infrastructure hosting costs of Nvidia and other vendors. But now as these multimodal, voice-enabled AI services scale up to serve billions of users worldwide, Apple is the one company uniquely positioned to be the on-ramp, AND provide valuable inference data back to the LLM AI companiues.

Apple of course realizes this, and thus is figuring out its strategy to work with the various LLM AI companies. And unlike the exclusive Search deal with Google, there maybe advantages NOT to do an exclusive deal on external LLM AI partners, at least for a while. From my perspetive, at a high level, there are several reasons Apple may be justified in leaning towards a multi-party “Guest external LLM AI” partner strategy, including:

  1. LLM AI Models keep improving and scaling at an unprecedented pace.

  2. LLM AIs not yet ready for mainstream, but getting there at a good pace.

  3. LLM AIs still hallucinate, but that too is being addressed…will take time to get it to ‘Apple Standards’.

  4. LLM AI Services still not familiar to most people in terms of Utility, as is Search and other online technologies and services.

  5. LLM AI infrastructure seeing massive investments in AI Cloud deployments, and their results are still at least 2-3 years away.

  6. LLM AI services have not yet been monetized in the tens of billions plus, relative to their investments to date.

For all these reasons and more, Apple’s exploration of a multi-party LLM AI partnership strategy may make sense. As it has for the Daily Show for now.

And for Apple uniquely, it highlights the leverage they have at this stage of these services trying to get mainstream distribution. That’s also potentially good business, along with benefiting Apple users at scale. With unique attention to their Trust and Privacy needs. As I’ve said before, Scaling AI Trust is as important as Scaling AI itself.

As I’ve mentioned many times before, contrary to general perceptions, Apple is NOT a late comer to AI. It’s just that AI has thus far been late getting ready to come to Apple and their ecosystem. And Apple vetting their options with various LLM AI companies at this early stage in the AI Tech Wave, is logical. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)

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