Apple Exits OpenAI Investment Talks Amid $6.5 Billion Funding Round

OpenAI has all the Strawberries in the World, but No Apple

Apple's decision to back out of OpenAI's monstrous $6.6 billion funding round last minute involves more than what meets the eye. OpenAI made history with its recent funding round, with a staggering valuation of $157 billion. Thrive Capital led the round with participation from Microsoft, Khosla Ventures, Nvidia, Tiger Global, Fidelity, and others. The stakes on this round were particularly high for those bullish on the growth of foundational models, and seeking to reap benefits in a post AGI and ASI world, which per Sam Altman, is closer than we think. Interestingly, Apple backed out last minute, and there is more than what meets the eye. This could be an indication towards Apple wanting to build its LLM capabilities in-house. In the generative AI race, Apple is still playing catch up, and their partnership with OpenAI felt like their leap into this space. But the iPhone maker has vast in-house capabilities to its advantage. This could be a huge reason why the funding partnership which was touted as one of its kind, fell flat. While there was a lot of promise for Apple as well in this funding round, ultimately it feels like it would build its capabilities in house, rather than relying on external outsourcing. While a partnership can still exist outside of a funding round, it is not far-fetched to assume that OpenAI would want its investors to contribute in a meaningful way, and expect some sort of exclusivity, despite the CFO saying otherwise. In an exclusive interview with CNBC, Sarah Frier, CFO at OpenAI, denied the company's influence on investors to not fund its competitors, like Perplexity, xAI, Safe Superintelligence Inc., among others. She has also called this just another funding round. As for Apple, this could also mean them investing more in their internal R&D and own architecture, instead of investing outside. While cost isn't what drove Apple from this funding round, it is more to do from a strategic and optics point of view of looking inwards. Earlier this year, with announcements in WWDC and the Glow event, Apple went big into integrating OpenAI into Apple intelligence, and the speculation around Apple joining this funding announcement seemed like a natural, more stronger progression. Independent of this, the integration of ChatGPT into iOS 18 later this year is still happening. But on the whole, this is a clear case of Apple going back to its conservative route of building its own LLMs. It has the wherewithal and capital to build and transform existing technologies and make them more accessible, polished, and user friendly. The goal would be to employ AI on devices as well as continue to offer cloud-based services. The news about Johny Ive, ex-Apple designer, joining OpenAI to work on a hardware device could also be an unfortunate bone of contention between the two companies given Apple's dominance in hardware. This was previously seen as a point of similarity. Microsoft's early investment in OpenAI has helped it capitalise on its technology and use it in its suite of products. Microsoft has been investing in OpenAI since 2019, when the company was still young and the wind of AI hadn't caught up with wall street or the general public. It has participated in the pivotal 2022 and 2023 funding rounds, which gives Microsoft exclusive license access to GPT-4 and all other OpenAI models. Effectively, Microsoft wields significant sway on the company. OpenAI's valuation was only $1 billion in 2019. It surged to $29 billion after ChatGPT's success in 2023. Currently, it's valued at $157 billion, which is also meteoric rise from its $86 billion valuation in February early this year. Apple's influence on OpenAI is still very palpable. In their recent DevDay in San Francisco, a live demo of an iOS app being built in 30 seconds using o1 was unveiled. For this paradigm shift in the future of app development, OpenAI opted to do the demo with iOS instead of Android. However this pans out, leveraging the respective consumer bases of Apple's iPhone (1.3 billion users) and OpenAI's ChatGPT (200 million weekly users) would yield a lot of value long term. OpenAI, and more particularly ChatGPT's design and product philosophy, is also very similar to the iPhone.

Despite being one of the biggest selling points of Apple Intelligence, Apple will not be investing in OpenAI

OpenAI, the creator of ChatGPT, is currently set to receive huge funding from corporate giants. Yet Apple has seemingly withdrawn interest, despite ChatGPT being one of the most important parts of Apple Intelligence right now. OpenAI is in a bit of a weird space. Just last week, it was reported that the AI company would be dropping its nonprofit structure and opting to make profit -- which seems antithetical to its stated goal of "building safe and beneficial artificial general intelligence for the benefit of humanity." Alongside this, CTO Mira Murati was announced to be leaving the company as it restructures for the new business model. This was just the final nail in the coffin for the company's altruistic aims, as it had previously set up a for-profit subsidiary, which the likes of Microsoft heavily invested in. A newly published report from the Wall Street Journal suggests that the current round of corporate funding could take in as much as $6.5 billion, despite Apple deciding to leave the talks. Microsoft is expected to put in another $1 billion, equating to a total of $13 billion from the company since OpenAI's inception. Nvidia is also said to be in talks to invest, though a concrete figure has not yet been solidified. Though it won't arrive until its beta in December, ChatGPT inclusion is one of the biggest selling points of Apple Intelligence, the company's grouping of AI software tools. This allows for better notification navigation, generative AI emojis, and writing tools. However, every part of the UI is also said to be refined with ChatGPT, which can generate art and words, but also answer questions, and give suggestions. It is supposed to be only one of a handful of chatbots coming to Apple Intelligence but will be the only one at the start -- and if the iPhone's history with the Google search engine is anything to go off, this deal could be quite lucrative for both companies. This makes Apple's move to pull out of talks seem a little strange. It is one of the most important parts of its upcoming software, and ChatGPT currently sees 200 million weekly users, so it owns a significant part of the chatbot market. However, those extra funds could be spent on diversifying Apple's range of chatbots -- something it will need to do to learn from Google's infamous antitrust dispute.

Apple reportedly exits OpenAI investment talks amid $6.5 billion funding round -- what you need to know

Apple has reportedly withdrawn from discussions to participate in a high-profile investment round for OpenAI. According to the Wall Street Journal's exclusive report, the next and last round of funding for ChatGPT's parent company is expected to raise upward of $6.5 billion and includes contributions from other tech giants such as Microsoft and Nvidia. Although the exact reason for Apple's withdrawal remains vague, the exit does raise questions about the company's future AI strategy. Apple has long highlighted user privacy and on-device processing as the driving force behind its approach to AI, a contrast to the more data-driven models such as OpenAI. The withdraw could indicate a shift toward Apple developing its own AI technologies or a focus on enhancing its existing AI capabilities. Another possible reason Apple is backing away from OpenAI's funding round could be a strategic move to stay true to its philosophy of safeguarding user data. Apple's own AI initiatives, such as those powering Siri and on-device machine learning, have typically lagged behind competitors like Google and Microsoft in terms of generative AI. Yet, the company has been continuously enhancing its technology within its ecosystem, which may hint at its plans to develop more proprietary AI solutions while adding further emphasis on more privacy-centric AI applications. In contrast, Microsoft's deepening relationship with OpenAI has further entrenched its place as a leader in generative AI. Without a doubt, this puts pressure on Apple, which now faces the challenge of defining its own path in this competitive sector. As AI becomes an integral part of both consumer technology and enterprise solutions, the tech world is left wondering whether Apple's decision to skip this investment round will prove beneficial or leave it playing catch-up.

Report: Apple won't invest in OpenAI after all -- but Microsoft will

Apple backed out of the $6.5 billion investment round at the 11th hour. A few weeks back, it was reported that Apple was exploring investing in OpenAI, the company that makes ChatGPT, the GPT model, and other popular generative AI products. Now, a new report from The Wall Street Journal claims that Apple has abandoned those plans. The article simply says Apple "fell out of the talks to join the round." The round is expected to close in a week or so and may raise as much as $6.5 billion for the growing Silicon Valley company. Had Apple gone through with the move, it would have been a rare event -- though not completely unprecedented -- for Apple to invest in another company that size. OpenAI is still expected to raise the funds it seeks from other sources. The report claims Microsoft is expected to invest around $1 billion in this round. Microsoft has already invested substantial sums in OpenAI, whose GPT models power Microsoft AI tools like Copilot and Bing chat. Further ReadingNvidia is also a likely major investor in this round. Apple will soon offer limited ChatGPT integration in an upcoming iOS update, though it plans to support additional models like Google's Gemini further down the line, offering users a choice similar to how they pick a default search engine or web browser. OpenAI has been on a successful tear with its products and models, establishing itself as a leader in the rapidly growing industry. However, it has also been beset by drama and controversy -- most recently, some key leaders at OpenAI departed the company abruptly, and it shifted its focus from a research-focused organization that was beholden to a nonprofit, to a for-profit Silicon Valley company under CEO Sam Altman. Also, former Apple design lead Jony Ive is confirmed to be working on a new AI product of some kind. But The Wall Street Journal did not specify which (if any) of these facts are reasons why Apple chose to back out of the investment.

Apple No Longer in Talks to Invest in ChatGPT Maker OpenAI

Apple has reportedly exited negotiations to invest in OpenAI, the company behind the popular ChatGPT AI chatbot, according to The Wall Street Journal. Apple had been in discussions to participate in a funding round for OpenAI that is expected to raise approximately $6.5 billion. However, Apple recently dropped out of the talks for reasons that remain unclear. The funding round is set to close this week. The development comes just a month after WSJ reported that Apple was considering an investment in OpenAI as part of a fundraising effort that could value the AI company at over $100 billion. The high valuation reflects the intense competition in the artificial intelligence sector that OpenAI helped ignite with ChatGPT's launch in late 2022. While Apple has stepped away, other major tech companies remain involved. Microsoft, which has already invested $13 billion in OpenAI, is expected to contribute about $1 billion to this latest round. Nvidia is also reportedly in talks to participate. The news of Apple's withdrawal may surprise some, given the company's recent moves in the AI space. Apple previously announced plans to integrate ChatGPT into Siri on iOS 18, iPadOS 18, and macOS Sequoia later this year. This integration will allow Siri to display ChatGPT responses directly with user permission. However, recent reports of turmoil within OpenAI's ranks as it pursues a for-profit structure, may have factored into Apple's decision not to pursue the investment. That said, Apple's planned ChatGPT integration for its platforms is still expected to proceed before the end of the year. The company has said that iPhone, iPad, and Mac users will be able to use ChatGPT for free without creating an account, while ChatGPT Plus subscribers will be able to access paid features on Apple devices.

Apple drops out of upcoming OpenAI funding round

Reports of the iPhone-maker in talks to potentially invest in OpenAI first came last month. Apple has dropped out of participating in the upcoming OpenAI funding round - just as talks are slated to close next week. Apple's exit from the funding round was first reported by the Wall Street Journal last Friday (27 September), who also reported that according to sources, Microsoft will invest $1bn in OpenAI, in addition to the $13bn it has already invested in the AI start-up since 2019. The upcoming funding round will be led by venture capital firm Thrive Capital with a $1bn into investment. Chip-maker Nvidia is also set to invest in the AI-giant. The funding round is expected to raise as much as $6.5bn. The start-up is reportedly also looking to raise $5bn in debt from banks as a revolving credit facility. OpenAI is set to reach a valuation of $150bn, significantly higher than its previous valuation of $86bn, making it one of the biggest start-ups in the world. However, talks are still in progress and more changes might occur. Last week, OpenAI announced a complete overhaul in its structure, shifting from a not-for-profit to a for-profit company, and giving its chief executive Sam Altman equity. Although, Altman said that he will not receive a "giant equity stake" in the company. On the same day, the company's long-term chief technology officer, and interim CEO during Altman's brief ousting last year, Mira Murati declared that she is leaving OpenAI. Murati's decision to leave seems to have come as a surprise, even to Altman, who wrote on X: "When Mira informed me this morning that she was leaving, I was saddened but of course support her decision." Along with Murati's departure, research VP Barret Zoph and chief research officer Bob McGrew also announced they are leaving the company. The process of changing the company's structure is long and complicated but will need to be completed within two years, otherwise investors in the current round can request their investment back. Don't miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic's digest of need-to-know sci-tech news.