Will a Google-Apple deal kill Microsoft’s AI dominance?

Microsoft is sitting on top of the world right now, thanks to its lead in AI. It’s the most valuable company on the planet, with a valuation of more than $3.2 trillion. Its rise was rocket-fueled by its investor relationship with OpenAI, the company that makes the wildly popular generative AI (genAI) chatbot ChatGPT. OpenAI’s GPT large language model is also the basis for Microsoft Copilot, the genAI tool that Microsoft is building into just about every one of its products, from GitHub to Windows to Microsoft 365 and beyond.

Microsoft’s AI dominance appears insurmountable. But things can change quickly in tech. Google and Apple are in talks to embed Google’s genAI tool Gemini into iPhones — a deal that, if it reaches fruition, could unseat Microsoft sooner than you think.

At the same time, Microsoft is moving with lightning speed to extend its AI lead, hiring the best AI minds in the business, furiously racing to launch improved versions of Copilot, and starting to monetize it.

Will Google and Apple topple Microsoft, or will Microsoft remain dominant in AI well into the foreseeable future? Let’s look at the potential Apple-Google blockbuster deal, examine Microsoft’s latest moves, and mix in the biggest wild card of all — the use of antitrust law by the US government (and European governments) to take on the tech super-giants.

The potential Google-Apple AI blockbuster

Google and Apple are in talks to bring Google’s genAI tool Gemini to the iPhone later this year,  “setting the stage for a blockbuster agreement that would shake up the AI industry,” in the words of the Bloomberg article that first reported the news.

If anything, that’s an understatement. Gemini is already built into Android phones made by Google and other device makers. If it were also on iPhones, Google would essentially have a monopoly on AI on mobile devices, shutting out Microsoft and OpenAI. The New York Times puts it this way: “Virtually overnight, Google could have more consumers using its A.I. than its chief rival, OpenAI, which makes ChatGPT.”

The deal would extend a longstanding Apple-Google relationship: Google already pays Apple $18 billion a year for its search engine to be the default on Apple devices.

The deal would do more than put Gemini into the hands of billions of people across the world, eclipsing Microsoft’s and OpenAI’s user base. It would also help Google make Gemini more powerful very quickly. A genAI tool is only as good as the volume and quality of data on which it’s trained — and training is an ongoing process that constantly improves the tool’s power and effectiveness. With billions of people using Gemini every day, Google would likely be able to improve it more quickly than ChatGPT and Copilot can be improved.

If all this were to happen, it could be déjà vu all over again for Microsoft. Decades ago, Microsoft had a worldwide near-monopoly on operating systems with Windows. It also released a mobile operating system — Pocket PC 2000 — seven years before Apple released the iPhone. It seemed its operating system monopoly would last forever.

But iOS (and the iPhone hardware) was dramatically better than anything mobile Microsoft created, and Android was better as well. Microsoft’s OS dominance vanished as smartphones took the world by storm. The same thing could happen with AI if the Google-Apple deal comes to fruition — Gemini would eclipse ChatGPT and Copilot thanks to mobile.

Why Microsoft may still dominate AI

Even if the deal goes through, Microsoft could still dominate AI. It has a substantial lead in AI, and it’s not taking anything for granted. OpenAI has been quickly releasing new, more powerful versions of GPT — version 4 was released in 2023, and it looks as if a “materially better” version 5 will be available this summer. So ChatGPT and Copilot are constantly becoming more powerful.

In addition, Microsoft just hired Mustafa Suleyman, co-founder of DeepMind, which was bought  by Google in 2014 and which ultimately became Gemini. After Suleyman sold DeepMind, he founded another AI startup, Inflection AI, and Microsoft has hired not just Suleyman, but nearly the entire AI staff of Inflection, including its chief scientist Karén Simonyan. Microsoft now has the best AI talent in the world either on staff or working for OpenAI.

Microsoft has also been busy monetizing AI. Copilot is now built into the company’s entire product line, offered as a fee-based add-on. Microsoft can plow that revenue back into research.

And, of course, it’s not a foregone conclusion that Google and Apple will make a deal. Even if they do, it’s not clear how well it will work.

The wild card: government regulators

Who comes out on top could ultimately be determined not by tech companies, but by the US government. Google and Apple are both fighting major federal antitrust lawsuits, and it wouldn’t be surprising if their AI deal draws scrutiny as well. The feds could try to kill a deal before it’s even signed.

At the same time, Microsoft has its own antitrust AI problems. The FTC is said to be investigating Microsoft’s cozy relationship with OpenAI for potential antitrust violations, so Microsoft could lose the main reason it has an AI lead — its deal with OpenAI.

All three companies are facing antitrust investigations and suits in the EU and UK as well.

The results of those suits and investigations could well determine which company will dominate AI in the future. I wouldn’t bet one way or the other on this one — too much is up in the air, including potential federal action. But we do know one thing: it’s going to be a wild ride, and not even ChatGPT, Copilot, and Gemini can predict the ultimate outcome.

Copyright © 2024 IDG Communications, Inc.


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