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[Column] Michiel Frackers: Microsoft and OpenAI have the upper hand, will Google and Apple join forces? column

[Column] Michiel Frackers: Microsoft and OpenAI have the upper hand, will Google and Apple join forces?

Microsoft embeds and attracts a lot of top talent for its AI-strategy; do Apple and Google answer by bundling Gemini into iPhone?

Consolidation wave in AI started

Meanwhile, in the AI market, what happened slowly in search engines some 20 years ago seems to be happening at lightning speed: the small ones quit or are acquired, until there is one dominant player left with eighty percent market share. The rest share the crumbs. Microsoft was the crumb thief with Bing, wants to avoid that with AI and has therefore acquired, maker of the incomprehensible chatbot Pi. An odd move since Microsoft is already major shareholder of market leader OpenAI, so how and why did this happen?

“Anonymous sources tell The Information that Microsoft is netting about $650 million: $620 million for non-exclusive licensing fees for the technology (meaning Inflection is free to license it elsewhere) and $30 million so that Inflection agrees not to sue over Microsoft’s hiring, which includes co-founders Mustafa Suleyman and Karén Simonyan.”

Insiders, you know them, the former social media experts on Twitter and LinkedIn who had turned themselves into NFT gurus, then became life coaches and have recently become AI-crypto experts, those folks knew for sure: Google Gemini would be baked into the new iPhone 16. There’s no way around it!

Until the photo turned out to be fake, or at least: dating back to 2017. But by then the genie was out of the bottle. Apple has no AI product on the market and Google Gemini is struggling against Microsoft and OpenAI, so Cook and Pichai would do well to bury the hatchet in the iPhone versus Android war and go to war together against the Microsoft/OpenAI camp.

Sounds logical in itself, also because Google already pays Apple 36% of the revenue it generates from visits coming in through Apple’s Safari browser, so the competitors already have a fruitful partnership. Only this week an uninvited guest appeared on the scene: Uncle Sam, in the capacity of the U.S. Department of Justice.

The United States versus Apple

It is not illegal to have a monopoly, but it is illegal to use that monopoly to prevent entry by potential competitors into new markets.

Of exactly that, keeping the iPhone closed to potential competitors, Apple is accused by the Justice Department and a host of states, in an indictment that is surprisingly easy to read. Page three looks like the opening of a John Grisham thriller, quoting an e-mail from a top executive to Steve Jobs, including Jobs’ own response. It's as if the DoJ is trying to sue Jobs posthumously.

Techcrunch has summarized the case well, and The Verge explains why consumers have borne the brunt of Apple’s actions, which itself was quick to respond with an explanation. Reuters correctly states that the result of the case may be that the iPhone becomes more user-friendly for consumers: more open, even if Apple wins or settles the case.

Indeed, it is not at all a foregone conclusion that Apple is going to lose:

“The fundamental assumption DOJ seems to have is that Apple must cooperate with its rivals to allow rivals to compete with Apple,” a legal expert said. “That has antitrust law backwards.”

Is bad news driving Apple into Google’s arms?

As if the lawsuit wasn’t enough bad news, a research team concluded that Apple’s phenomenal silicon chip, the flagship product that allowed Apple to jettison Intel, has a serious security flaw. While Apple has boasted for decades that it is so much more secure than the Windows architecture.

Fortunately, the potentially affected group is relatively small, since to access the leak you must first download and run specific software yourself on your Mac. Still, this made it a week of stain upon stain for Tim Cook and Apple.

Meanwhile, the genie is out of the bottle and won’t go back, just watch:

  • Bloomberg: Apple in talks with Google to build AI into iPhone
  • CNET: Google Gemini on iPhone becomes the mainstream moment of AI

A possible partnership with Google to package Gemini along with the iPhone 16 and the new iOS 18 operating system could revive Apple’s stock price. While the S&P 500 rose more than 10 percent in the last year, Apple’s stock fell more than seven percent. Painful for the company that has long been the most valuable company in the world. More on that in Spotlight 9, which I have posted separately so as not to turn this newsletter into a digital version of the Dead Sea Scrolls.

Conclusion: Gemini on iPhone = OpenAI in Windows

All possible lawsuits and investigations notwithstanding, any bundling of Google Gemini with iOS and the iPhone 16 would give Microsoft all the room it needs to do the same with OpenAI.

Because Windows Mobile was a spectacular failure,it means for Microsoft and OpenAI that on mobile devices they are virtually hopeless against the Apple-Google combination and their iPhone-Android devices.

Microsoft Windows is still the market leader in the desktop computer market with over seventy percent market share. In addition, a number of new, unusual players have been warming up around the AI playing field for some time: the sovereign wealth funds of Abu Dhabi and Saudi Arabia are expected to join in with at least several tens of billions, while Singapore also seems to be coming out of the dugout.

The question is which camp these country teams will join. Microsoft/OpenAI seems to be the most active club, working for years to build ties in those regions, with help from Ben Horowitz, co-founder of the powerful investment fund Andreessen Horowitz.

Any illusion that Europe can still play a significant role in the AI market is thus gone. It is likely that the high-quality European AI companies will all be gobbled up by the American giants, with or without the support of Arab and/or Asian money.

Spotlight 9: Apple stock price drop and the week of Nvidia and Reddit

More on Apple’s disastrous stock price drop this year, not even compared to other tech companies but compared to the classic S&P 500, in the investment section Spotlight 9

In it also more about the unexpectedly successful IPO of the popular but loss-making website Reddit, a possible SEC investigation into Ethereum that depressed cryptocurrency prices and, of course, we focus on Nvidia, which last week had a spectacular developers conference where CEO Jensen Huang presented no less than two hours of innovations with only one conclusion: Nvidia’s rise continues.

Blackwell is not a chip, but a platform" - Nvidia CEO Jensen Huang

Super Mario update and my own theme song

Finally, an update on last week’s newsletter. I expressed surprise at the fact that Google Gemini won’t even say in which countries elections are taking place this year, especially to avoid providing political information, but did produce an educational pamphlet to my question about what Super Mario got into his head when he wanted to save Princess Peach.

Only I mistakenly linked to another answer, when this is what Google Gemini actually said about Super Mario. Yep: the Googlers whispered to Gemini that Super Mario is about teamwork and that the princess and Mario can also remain friends. Maybe Mario wasn’t Italian after all.

Another thorny issue was General Motors’ selling of its customers’ driving habits to insurers. Those who loved a sport turn on their time could be served by their auto insurance company with a substantially higher premium at the end of the year. After a wave of criticism, GM announced it would immediately stop selling the driving records of its customers. Excellent!

Then this week’s surprise, which is undoubtedly Suno, the baffling AI service that allows anyone to type in a piece of text and moments later a two-minute song spits out. Apparently, only paying subscribers retain the rights to their music, so that may cause some hassle with the free users. Thanks to Frank van Hoorn and to Michiel Schoonhoven who both tipped me off!

Especially for this Sunday morning, I composed — because this is the new composing — all by myself three variations of a real theme song of this newsletter:

Michiel Frackers is the Chairman of Bluenote and Chairman of Blue City Solutions

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