Alphabet Soars as Apple Rumored to Bring Gemini AI to iPhones

Alphabet Inc.’s stock surged over 7% in trading today following reports that Apple Inc. is in advanced talks to license Alphabet’s cutting-edge Gemini artificial intelligence system for integration into future iPhone models. If a deal is reached, it could represent a major coup for Alphabet in getting its AI onto hundreds of millions of additional devices.

The news comes from a report in the Tech Insider blog citing sources familiar with the negotiations. According to their information, Apple has been highly impressed with the demos of Gemini and views integrating the AI system as a potential game-changer that could provide iPhones with transformative new capabilities.

Gemini is Alphabet’s latest breakthrough in the red-hot field of generative AI. While details remain tightly under wraps, it is believed to combine cutting-edge large language models with multimodal perception to enable highly advanced question-answering, analysis, task completion, and even creative capabilities across text, images, audio, and more.

One of Gemini’s rumored signature features is the ability to see and understand the real world through a device’s camera. This could allow iPhones to identify and provide information about objects, people, surroundings, and more through augmented reality displays. It could also enable advanced productivity functions like automatically generating emails, messages, or documents based on voice dictation or images captured by the camera.

Analysts have speculated that Apple could even integrate Gemini into its neutral Scene Semantic interface to enable direct natural language interaction and control of the entire iPhone operating system. This could make iPhones feel more like having a highly knowledgeable digital personal assistant inside the device.

“Gemini represents one of the biggest AI breakthroughs we’ve seen from any major tech company,” stated AI research analyst Ahmed Bhuiyan. “It has the potential to transform not just smartphones but countless other computing applications by making AI a seamless part of how we interact with devices and software. Licensing it to bring that same game-changing experience to iPhones would be an absolute grand slam for Apple.”

Neither Apple nor Alphabet has officially confirmed the licensing talks. In previous statements, Alphabet executives have said they are open to partnerships to bring Gemini AI capabilities to third-party devices and services, likening it to Google’s model of widely licensing its Android mobile operating system.

“We believe AI will become as ubiquitous as operating systems themselves, with many different devices and software tapping into these advanced AI models in the cloud through APIs,” said Alphabet’s head of AI products Benjamin Wu at the company’s recent Gemini technical unveil. “We intend to make Gemini available wherever consumer and enterprise demand exists.”

If completed, the licensing deal is expected to involve both an upfront fee to Alphabet as well as ongoing per-device royalties each time Gemini AI capabilities are provisioned on a new iPhone. Analysts estimate the total addressable market for Gemini on iPhones could be worth tens of billions annually for Alphabet within just a few years as more advanced AI functions roll out.

The hype over the potential integration lifted Alphabet’s shares 7.3% to $119.87 while Apple’s stock was relatively flat at $171.05.  

Apple has faced increasing pressure to demonstrate leadership in cutting-edge AI following the immense success and attention around Microsoft’s partnership with OpenAI to integrate ChatGPT and other advanced language AI into its products and services. The company has made AI a top priority under CEO Tim Cook but has so far struggled to match the generative AI breakthroughs from Microsoft, Google, and OpenAI.

Acquiring and productizing generative AI capabilities through licensing agreements like this rumored Gemini deal could provide Apple with a faster path to bolstering its AI arsenal beyond its current focus areas of machine learning for core OS, image, and app functionality.

“Apple absolutely needs to have an answer to AI like ChatGPT available on iPhones very soon, otherwise they risk falling behind the competition,” Ben Bajarin, the lead analyst for consumer platforms at Creative Strategies, told Tech Insider. “They can’t realistically develop something as powerful as Gemini from scratch in-house with their current AI capabilities. Striking a licensing deal may be their fastest option, even if it means being beholden to a major rival like Google in the short-term.”

Alphabet’s stock surge and Apple’s specific interest also highlight the immense value and future revenue potential around generative AI systems like Gemini. In recent months, tech giants from Microsoft to Meta have rushed to accelerate their own generative AI programs while inking deals to incorporate models like GPT-4 across key products and services.

If Alphabet can strike lucrative licensing deals like the rumored Apple agreement, it stands to earn billions annually on top of the internal use cases it has already developed across Google search, productivity software, YouTube recommendations, and more. Combined with the advertising revenue uplift from improving products with generative AI, analysts estimate Gemini alone may drive over $30 billion in incremental value for the company within 5 years.

Generative AI has rapidly emerged as likely the hottest area in tech over the past year, with breakthrough systems like ChatGPT capturing the imagination of consumers and enterprises alike. While only a rumor for now, the prospect of iPhones powered by Alphabet’s Gemini has clearly resonated with investors eyeing the immense potential revenues at stake. All eyes now turn to Apple and Google to see if an official announcement around a licensing agreement materializes in the days ahead.

Justin Lian

Justin Lian

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