OpenAI deal would be AI 'golden goose' for Tim Cook and Apple, says Dan Ives

By James Rogers

'We would expect Apple to build out a next level Siri technology with OpenAI that can do complex tasks for Apple users,' says Wedbush analyst Dan Ives

An AI deal between Apple Inc. and OpenAI could bring "myriad" revenue opportunities to the tech giant by bringing ChatGPT to the iPhone, according to a popular analyst.

"Based on Bloomberg and other media reports it appears the Apple and OpenAI partnership is now close to a done deal," Wedbush analyst Dan Ives wrote in a note Monday. "While Apple has been in discussions with Google AI partnership for Gemini the golden goose for Cook and Cupertino was to have exclusive OpenAi and ChatGPT powered AI features in iOS 18 and ultimately embedded in the upcoming iPhone 16 launch this September."

Last week Bloomberg reported that Apple (AAPL) and OpenAI have been finalizing terms for a deal to use ChatGPT in iOS 18.

Related: Apple refreshes iPad Air and iPad Pro lineups - while talking up AI

"Having OpenAI chatbox embedded in iPhone 16 will also open up avenues of growth and the all-important developers to flock to the Apple ecosystem along with the Microsoft developer ecosystem in to," Ives added. "In essence, it changes the game having a tight partnership with OpenAI and for Microsoft/OpenAI it's a smart strategic move to tie themselves in with the biggest consumer installed base in the world looking forward."

Microsoft Corp. (MSFT) has a long-standing partnership with OpenAI, which was expanded last year.

Ives expects that Apple's OpenAI partnership will be formally unveiled at the tech giant's WWDC developer conference on June 10 and will consist of an OpenAI Chatbot with exclusive features that build upon on-device Apple Large Language Models and cloud-powered Apple LLMs. The analyst also expects to see Apple powering AI on its own high-end chips.

Related: Here's how Apple might take AI to the next level

"Inking a partnership with OpenAI opens up a myriad of paths and revenue opportunities on the Services front that Apple can take this technology and ChatGPT features on the iPhone," added Ives. "We expect exclusivity around a number of these advanced AI OpenAI features on the iPhone that Apple will build around a broader AI strategy on iPhone 16 and iOS 18."

"We would expect Apple to build out a next level Siri technology with OpenAI that can do complex tasks for Apple users and more advanced features that will eventually be a separate monthly subscription service along with other AI features," he wrote. Wedbush maintained its outperform rating and $250 price target for Apple.

Apple talked up AI when the tech giant refreshed its iPad Air and iPad Pro lineups earlier this month. Talking about the new M4 chip that powers the latest iPad Pro tablets one speaker described the processor's neural engine as making it "an outrageously powerful chip for AI."

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The latest iPad Pro also offers an AI photo feature that removes shadows from receipts and other photos of documents.

Apple and OpenAI have not yet responded to a request for comment on this story.

Apple shares, which have fallen 4.9% in 2024, are up 1.2% in premarket trades Monday.

Emily Bary contributed.

-James Rogers

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05-13-24 0824ET

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