Well, how quickly things change in the tech world. Alphabet’s Google has received considerable criticism for its overly progressive Gemini AI, and for falling behind OpenAI. Now, there’s speculation that Apple may license Gemini for its devices.
Apple has faced its fair share of challenges recently, one being a $490 million settlement due to Tim Cook’s comments during a call, where he was accused of downplaying the sales situation in China several years ago—an expensive oversight. Apple has also trailed in the AI race, and its venture into electric vehicles (EVs) seems misguided. Recently, the company has pivoted from its EV ambitions to intensify its focus on AI development.
It’s hardly surprising that Apple and Google would consider collaborating on AI, as both are perceived to lag behind Microsoft and OpenAI.
Google needs to increase adoption and catch up with OpenAI’s ChatGPT. Partnering with Apple could provide a significant distribution channel through Apple’s vast array of devices.
Meanwhile, Apple has made little notable progress in AI since Siri, at least from what is publicly known. However, the fact that Apple is considering licensing AI software suggests that the company acknowledges its need to catch up.
To clarify, the deal has not been confirmed. Furthermore, Apple is in discussions not only with Google but also with OpenAI. However, I believe Google might have a better chance, mainly because OpenAI is closely aligned with Microsoft, and Apple may not want to inadvertently bolster Microsoft’s position in AI.
Google also compensates Apple with 36% of Safari search revenue, amounting to $18 billion annually, to remain the default search engine on the browser.
It seems plausible that Google could similarly compensate Apple to incorporate Gemini on its devices. Apple, despite being behind in AI, retains significant bargaining power, as its hardware is not at risk of becoming obsolete. For Google, however, the stakes are higher as its search dominance could be threatened if users increasingly turn to AI for queries. This makes Google the more eager party in this negotiation.
Even if Google ends up compensating Apple, it could still benefit from the arrangement by gaining access to Apple’s user base and sharing profits from Gemini subscriptions. This potential agreement, like their existing deal on search, could be mutually beneficial.
Alphabet’s shares rose 5% following these developments, while Apple’s stock remained relatively unchanged—a testament to the greater perceived benefit for Alphabet from this potential AI partnership.
