Hello and welcome to Eye on AI. In this edition...why Apple's AI bet on the iPhone 16 matters to more than just Apple; a once-promising German AI startup pivots away from its own AI models; North Dakota emerges on the frontlines of the AI data center wars.
Apple announced yesterday that its new iPhone 16 will go on sale later this month. The phone is the first to be designed specifically to support the company’s “Apple Intelligence” features, including new AI photo editing tools, an improved version of Siri, generative AI writing aids, and the ability to summarize emails and notifications. Access to OpenAI's GPT models through Siri is coming too. It’s all powered by Apple’s new operating system, iOS 18, and inside the phone by Apple’s custom A18 chip which has been designed to support AI workloads.
Many of these new AI features won’t roll out to customers until later in the year, or even next year. Overall though, the phone represents a big bet that demand for AI features will convince consumers to upgrade, awakening iPhone sales from a somnolent period that has been a drag on Apple’s revenues and its share price. Sales of the iPhone 16 are also poised to be a bellwether for the overall consumer generative AI market. And so far, the strength of that market is far from certain.
Consumer chatbot use is hot, but the money is on enterprises
Yes, OpenAI and Meta both announced seemingly impressive user numbers last week. OpenAI said 200 million people now use ChatGPT each week. Meta said its AI chatbot had 400 million active monthly users and 185 million weekly users. Those numbers are an indicator that there is a real consumer market for gen AI products.
But it's unclear that an upgraded digital assistant and some new gen AI writing and photo editing tools will really be enough to convince people to shell out between $799 and $1,200 (depending on the version) for a new phone, especially when you can already access ChatGPT or Meta’s AI on your existing devices.
The real money from gen AI is being made in the enterprise, even as some chief information officers complain they aren’t seeing enough value from gen AI software. OpenAI revealed last week that it now has 1 million paying business customers for its service and that 92% of the Fortune 500 are using OpenAI’s models in some capacity. Meta has said its Llama large language models—which it makes available for free—have been downloaded some 350 million times. That figure is an indicator that developers are trying to build AI applications based on Llama. Moreover, it's evidence that the generative AI boom is still far from petering out. (Meanwhile Anthropic has belatedly entered the enterprise AI space as my colleague Sage Lazarro pointed out in this newsletter on Thursday.)
AI reinforces the dominance of today's tech titans
One thing that is apparent from this past week’s news is the extent to which the next big technology platform—AI—is likely to be dominated by the same set of giant tech companies that currently rule the roost: Google, Microsoft, Amazon, Meta, and Apple, alongside AI chip titan Nvidia. There was a brief moment, 18 months ago, when a few of these giants looked vulnerable. ChatGPT, some argued, was poised to be a Google-killer. Apple and Amazon both seemed hopelessly behind in their efforts to build large language models and integrate them into their product lineup.
But that moment was vanishingly brief. It is now becoming apparent that while the pecking order of these giants might be scrambled by AI, as a group their preeminence is unlikely to be usurped.
OpenAI is the closest of any upstart to breaking into this top tier, but even it is completely dependent on the largesse of the tech giants. Its success is largely due to the funding and data center infrastructure Microsoft has provided it. OpenAI seems to be trying to break its dependency on Microsoft—reports are that it is looking to raise billions in new funding in an investment round that could include Apple and Nvidia, as well as Microsoft and a gaggle of Silicon Valley venture capital firms. But the fact OpenAI needs more cash, despite having received a $10 billion commitment from Microsoft a little more than a year ago, is a testament to just how high its current burn rate is and how tricky its path to ever escaping the orbit of its Big Tech patrons will be.
This concentration of power should be a concern. As with previous tech platforms, there is a tendency towards monopoly or at least oligopoly. That has costs—in innovation and choice—even if these harms are not always as immediately apparent as higher prices are. In the U.S. and the EU, governments are only now seeking to address the concentration of power inherent in previous platform shifts—to the internet and mobile. Maybe we won’t have to wait as long for regulators to do something about the control these few companies exert over AI’s development. But I’m not holding my breath.
Here’s more AI news.
Jeremy Kahn
jeremy.kahn@fortune.com
@jeremyakahn
Before we get to the news. If you want to learn more about AI and its likely impacts on our companies, our jobs, our society, and even our own personal lives, please consider picking up a copy of my book, Mastering AI: A Survival Guide to Our Superpowered Future. It's out now in the U.S. from Simon & Schuster and you can order a copy today here. In the U.K. and Commonwealth countries, you can buy the British edition from Bedford Square Publishers here.
