Recent reports indicate that Apple (NASDAQ:AAPL) is in talks with Google parent company Alphabet (NASDAQ:GOOGL) regarding the integration of Google’s generative artificial intelligence (AI) model, Gemini, into the next iPhone. This development has sparked excitement in the tech world, as it could potentially revolutionize the capabilities of Apple’s flagship device.

Apple’s CEO, Tim Cook, has promised investors that the company will introduce generative AI capabilities this year, aiming to deliver transformative features that “break new ground.” This move comes at a time when Apple is under pressure to find new sources of growth, as its smartphone rivals, such as Samsung and Google, have already integrated Gemini into their latest devices.

Despite the fierce competition in the smartphone market, the potential partnership between Apple and Google on AI should not be surprising. It would build upon one of the tech sector’s longest-standing collaborations. Since the launch of the iPhone in 2007, Google has played a crucial role in its success. Initially providing Google Maps for navigation, Google later became the default search engine on the iPhone’s Safari browser, reportedly paying Apple over $18 billion a year for this privilege.

If the deal involving Gemini goes through, it would be a significant win for Google. With over 2 billion active devices, Apple’s reputation for protecting customer privacy would make it an ideal platform for Google’s AI to reach a vast audience. This partnership could potentially give Google more users for its AI than its main rival, OpenAI, which is backed by Microsoft (NASDAQ:MSFT).

For Apple, having the Gemini model on its iPhones could be a lucrative opportunity. Google currently charges $19.99 per month for its Gemini Advanced app, and Apple could potentially earn a share of this revenue.

While Apple has been developing its own AI technology, including a large language model (LLM) called Ajax and a chatbot named Apple GPT, it is believed to be lagging behind Google and others in AI development. Without the extensive server farms needed to train AI models, partnering with a company like Google appears to be the most viable option for Apple.

The talks between Apple and Google are ongoing, with any potential deal likely to be announced at Apple’s annual Worldwide Developers Conference (WWDC) in June. However, regulatory scrutiny and the possibility of Apple choosing another AI provider could impact the outcome of the negotiations.

In conclusion, a partnership between Apple and Google on AI could be a game-changer for both companies. Google would gain access to a vast user base for its AI, while Apple could enhance the capabilities of its devices with cutting-edge AI features. For investors, Alphabet stock remains an attractive buy, with Google’s dominance in online search, mobile search, and cloud services positioning it for continued growth in the future.

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