Apple Intelligence Powered by…Meta?

0:00On today's AI Daily Brief, Apple is in talks to partner with Meta and might avoid Europe altogether. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. To join the conversation, follow the Discord link in our show notes.

0:22Hello, friends. Quick note before we dive into today's show. I am just getting back after nearly 24 hours without power after some freak summer thunderstorms yesterday. And so unfortunately, today's episode only has our main discussion. We do not have headlines, and as you'll probably notice, it will be a little bit shorter than normal. However, never fear, there's lots going on, and tomorrow we will catch up on all the headline news. But for today, like I said, we are just doing our main episode talking about Apple and Meta. To get into this, it's worth having a little bit of context. Apple and Meta aren't really friends.

0:58They're not even really frenemies like Google and Apple. Google and Apple, of course, although they sometimes compete in terms of iPhone versus Android. They also have a huge financial relationship where Google pays Apple tons and tons of money to be the default search engine for Safari and on these devices. Meta and Apple, on the other hand, just come at the world in fundamentally different ways. Meta's advertising-focused business model is basically anathema to the product selling, and thus data and privacy preserving, Apple. What's more, in recent years, they've come more into competition around a new generation of devices.

1:31You might remember back in February, when Zuckerberg really started to get his mojo back by doing a direct-to-camera review of Apple's Vision Pro. Greg Eisenberg summed up, Mark Zuckerberg finally tried the Apple Vision Pro and compared it to the MetaQuest 3. He says, Quest is 7x less expensive, yet way more comfortable. Quest is better for gaming, Xbox, and YouTube. Quote, I'm surprised how much better Quest is for the majority of things. Of course, the last couple months have validated a lot of Zuckerberg's critiques, with the latest reports being that Apple is not even going to launch another high-end Vision device because of a lack of demand.

2:03The Verge writes Apple's Vision Pro team is reportedly focused on building a cheaper headset. According to the information, Apple has instead been focusing on finding ways to reduce the cost of components and is trying to launch a cheaper headset aiming to ship by the end of next year. Anyways, all of this is prelude to the news we got yesterday that despite any past relationship whatever, Apple and Meta have been in discussions around an AI partnership. Writes the Wall Street Journal, the longtime rivals have held talks about potentially integrating Meta's generative AI model into Apple intelligence.

2:32The WSJ kind of frames this as Apple playing catch-up. They write, 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. Of course, earlier this month at WWDC, when they premiered Apple intelligence, the first partner that they announced was OpenAI's ChatGPT. Said Apple software leader, Craig Federighi, we wanted to start with the best and that ChatGPT quote represents the best choice for our users today. However, if you've been listening to this show for a while, you'll know that Apple was also in conversations with Google and that a deal with Gemini just hadn't materialized.

3:07But now it appears that in addition to Gemini and ChatGPT, they've also been talking with not only meta, but anthropic and perplexity. Again, if the big story here is just the fact of the talks at all, the journal tries to pull out some discussion around what it might all mean. They write the discussions with Meta highlight the unlikely alliances that are forming between major technology companies in the AI 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.

3:36This is certainly true. One of the things that we've discussed quite a bit here on this show is the fundamental break with the patterns of history that AI represents as big tech has gotten involved so early in this new tech category. There are a million reasons for that, most notably the high cost of compute, which really makes them kind of the only game in town when it comes to getting the capital needed to actually compete and train these models. Still, it definitely causes for some uncomfortable bedfellows. Not only, for example, are OpenAI and Microsoft trying to deal with the fact that OpenAI was a central feature of the Big Apple announcement, but they're also figuring out what their own relationship is and where OpenAI sits relative to the new Microsoft AI internal team led by the former group that was at inflection.

4:18Coming back to the meta deal, though, the journal also confirmed from its sources that these deals are not financial deals per se. They write in talks with other AI companies Apple hasn't sought for either party to pay the other. 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 journal also points out that if the discussions haven't been finalized, and even if they are, it's not 100 % clear what it's going to mean financially for the companies.

4:47Quote, 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. Gene Munster, an Apple analyst and managing partner at Deepwater Asset Management, pointed out that while ChatGPT usage is expected to double from the Apple partnership, its infrastructure costs are also expected to grow 30 to 40 percent, and his best guess is that 10 to 20 percent of Apple users will upgrade from ChatGPT to premium. For some, this is all just confusing. Jack Rains writes, so Apple signed a deal with OpenAI, and now it's considering a deal with Meta and Anthropic and Perplexity?

5:19What is the end goal of this? Siri becomes one of five different Gen AI models. However, Apple Leaker puts it pretty crisply. It seems nobody understands how all this works. Apple will offer a variety of AI models like ChatGPT, Anthropic Cloud, Google Gemini, Meta AI, Perplexity, etc. to answer quote-unquote world knowledge questions which Apple's own secure models cannot. If you don't trust any of these companies, you can simply choose not to opt into using them. But if you do opt in, your IP address will be obscured, no personal information is shared, and your query is not allowed to be stored.

5:47The point here being, and there's shockingly little of this conversation, Apple doesn't want to be kingmaker among these AI companies. Even though ChatGPT got announced first, they want Apple intelligence to be the big brand, and all of these companies to just feel like offshoots. In that light, not only is it not surprising that they're talking with Meta, it would be insane to think that they wouldn't be. And really, that's the picture that's starting to emerge. It feels likely to me that within the next 6 to 12 months, every single one of these major models, all of the big AI labs, are able to offer what they have through Apple intelligence.

6:20The more interesting question, then, is who this benefits most. One argument could be that it just accrues to the existing brand winners, that people opt into ChatGPT because that's the one they already know, for example. But there's also a compelling argument that by being elevated along the same level as the chat GPTs and Google Geminis of the world, it actually could help a Claude, for example, do more to catch up. Anyway, from where I'm sitting, the big thing is that this confirms that Apple wants Apple Intelligence to be the big recognized brand when it comes to how people interact with AI, and all of these partners to be exactly that, just partners.

6:55A quick note before we get back to the show, today's episode is brought to you by Superintelligent. Super is, of course, the platform that we built and released a couple months ago to help people learn how to use AI. It's built around fun, fast tutorials that get you actually using AI in minutes, not hours, and certainly not days. The learning all happens in the context of an engaged community, and we've got a bunch of exciting features rolling out in the weeks to come. One of those is a new Teams version of the platform, which includes a custom curated playlist, as well as a showcase where people on your team can share their use cases and projects in AI across the organization.

7:29If you are interested in being a part of the Super for Teams beta, go to bsuper.ai slash partner so you can learn about the program. Now one other interesting piece of news regarding Apple. The information reports Apple throws down the gauntlet to European regulators. Martin Piers writes, will Europeans start to regret their government's aggressive regulation of US tech? That's surely going to be a question sparked by Apple's decision today to withhold a bunch of attractive new technologies such as its AI-powered offerings from its products in Europe, citing the continental rules on how tech firms operate.

8:01Basically, at the end of last week, Apple announced that it would not be rolling out AI in the EU over concerns around the EU's Digital Markets Act. Apple said in a statement, We are concerned that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security. Bloomberg writes, Apple's decision to halt the rollout in the EU will mean consumers in all 27 of the bloc's nations, including the likes of France, Germany, Spain, and Italy, won't have access to the company's ambitious new AI technologies for now.

8:28It's not clear how the features might violate the DMA, but withholding the technology threatens to irk consumers in the region, who might potentially put pressure on regulators. Moving back to Martin Piers again in the information, he writes, Apple blamed its decision on rules imposed by the Digital Markets Act in Europe. Is that a valid excuse? Who knows? In a way, it doesn't matter. What's significant is that a US tech giant is finally responding to the increasingly demanding European rules. It feels like it's only a matter of time before a US company decides the European market simply isn't worth the trouble.

8:57Piers goes on to point out that Apple doesn't quite have the same market power in Europe that it does in the US. For example, it has about half the US smartphone market, but only about a third in Europe. But, as Piers writes, Tim Cook may think taking a stand against European bureaucracy is worth the cost of lost iPhone sales. If that's what Cook is thinking, he should be applauded. There's ample evidence Europe's regulations are hurting the continent. For evidence, Piers points to another Wall Street Journal article in January that argued that Europe was falling behind the US and China in tech sectors such as AI and electric vehicles, thanks to its rules.

9:26Quote, Apple's decision suggests Europeans may soon have to be content with substandard consumer tech services as well. This is certainly the vibe that you get when you look on Twitter. Daniel Castro writes, the EU is offering a masterclass on how to stall digital innovation. David Galbraith writes, wake up Europe, the digital age is bypassing you. You have no Google, Amazon, Meta, Apple. You arrogantly called SpaceX a fanciful dream and it wiped out the European Space Agency. You have no NVIDIA and your response to AI has been to regulate before you have anything domestic to regulate. Your car industry is about to be wiped out by the Chinese.

9:58Your biggest economy shut down nuclear out of spite and with fraud. Your capital markets have no liquidity and your startups are drowning in your bureaucracy. Et cetera, et cetera, et cetera. It is pretty hard to deny that Europe's actions suggest that they're more interested in leading on regulation than they are on leading in the industries that they are regulating. Now, to the extent that regulations are actually stimulating to industry, maybe there's some nuance here. I think you could make that argument a lot better in the crypto case, for example, where the European MECA rules actually probably have helped relative to, for example, the US's lack of clarity around digital assets.

10:31This big focus on regulating it versus incubating it, it's hard to see how it ends up with a robust European AI sector. Certainly something to keep watching, but for now, that is going to do it for today's AI Daily Brief. Appreciate you listening or watching as always, and until next time, peace.

10:53Thank you.