Despite my issues with Apple’s AI efforts, I’ll occasionally hit up Siri with an obscure question.
When I do, I usually get the same response:
“Do you want me to use ChatGPT to answer that?”
That’s because Apple and OpenAI struck a bargain last year to enhance the “Apple Intelligence” AI system.
Apple Intelligence uses Apple’s own models for on-device tasks. But because of this deal, when Siri needs help it asks your permission to send a query to ChatGPT.
In return, OpenAI gets something most companies would trade a truckload of GPUs for…
Access to the iPhone crowd.
This deal seems to work out fine for the average iPhone consumer, although it really just adds a layer between me and my ChatGPT app.
But I hadn’t given it too much thought until this week, when — out of the blue — the deal between these two tech giants became a huge issue.
Not surprisingly, Elon Musk was involved.
Here’s what happened, and what it really means…
What’s This Beef Really About?
In June of last year, Bloomberg reported that there was an unusual structure to Apple’s deal with OpenAI.
Apple wasn’t paying OpenAI in cash. It was “paying” with distribution.
In other words, access to hundreds of millions of Apple users.
It’s a simple funnel. Apple sends users to ChatGPT to handle certain questions, and OpenAI banks on a portion of those users converting to paid accounts inside Apple’s ecosystem.
And the deal makes sense when you consider the going rate for distribution on the iPhone.
Google pays billions of dollars every year to remain Safari’s default search. In 2022 alone, court filings show the company paid $20 billion for this privilege.
If that’s the price Apple can command to sell attention, then you can see why OpenAI agreed to take a slice of that attention instead of cash.
But this deal was cemented last year. So what’s all the fuss about today?
It started on Monday when Elon Musk accused Apple of favoring OpenAI in the App Store.
He also wrote: “xAI will take immediate legal action.”
But OpenAI CEO Sam Altman was having none of it. He fired back with this post:
And the internet did what it does best when billionaires bicker.
It turned the feud into content.
But I don’t really care if these two are fighting again. They have a long history of sniping at each other.
Musk co-founded OpenAI in 2015, but he left in 2018 after a failed takeover bid. Altman won that power play, and Musk has been firing shots at the company ever since.
He’s accused OpenAI of abandoning its non-profit mission, of being too close to Microsoft and of putting profits over safety.
He even sued the company over its mission before dropping the case in June 2024.
That’s why I’m more concerned with why Musk brought up this deal in the first place.
Because I believe there’s much more to this dust-up than the bad blood between Musk and Altman.
For one, there’s the timing of Musk’s post.
His AI company, xAI, is growing fast. In March, just after Grok 3 launched, the service pulled in nearly 203 million visits.
But it’s still trapped inside X’s walls…
And that’s not the same as being on hundreds of millions of iPhones.
Meanwhile, OpenAI is reportedly nearing 800 million weekly active users as of early August.
So you can see why Musk would consider it a strategic threat if the App Store’s front page seems tilted toward ChatGPT.
After all, he threatened to ban Apple devices at his companies when Apple first announced the ChatGPT tie-in last year.
But public fights like these also appear to play to Musk’s strengths.
He knows that turning a business dispute into a viral moment puts pressure on his rivals and rallies his base. It’s the same playbook he’s used with regulators, short-sellers and competitors in other industries.
Then there’s the optics war.
Musk has framed himself as an AI safety advocate while running a for-profit AI shop. By accusing Apple of “favoring” OpenAI, he paints himself as an underdog taking on Big Tech gatekeepers.
That’s why I don’t believe this spat is just about App Store rankings.
It’s about who owns the most valuable entry point to consumer AI. Because the iPhone is still the richest on-ramp in consumer tech.
Musk wants a lane onto that on-ramp, but Apple gave OpenAI the go-ahead first.
Here’s My Take
If the App Store is the new scoreboard for AI, then we can’t ignore Musk’s claims that Apple rigs discovery in ChatGPT’s favor.
But Apple insists its featured spots and rankings are based on “objective criteria” and expert curation.
What’s more, Community Notes and third-party trackers pointed out that other AI apps have hit No. 1 this year, including DeepSeek and Perplexity.
In other words, ChatGPT isn’t the only one that has made it to the top this year.
Now, I can agree that Apple’s App Store picks aren’t above scrutiny. But the public data doesn’t show a ChatGPT monopoly on the charts.
This suggests Elon is making a bigger deal of this situation than the facts support.
In fact, I believe there’s a big “tell” that this race is still wide open.
Yes, it seems most people only use Grok to fact check on X. So Chat GPT definitely has the lead.
But it’s interesting to me that the action of using AI hasn’t gotten a verb yet. Like how most people call tissues “Kleenexes.”
Or how, when you search online, you probably say: “I Googled it.”
And when you use a rideshare service, you likely say: “I Uber-ed there.”
That kind of shorthand doesn’t exist for LLMs yet.
Ultimately, it comes down to this…
Apple’s “payment” to OpenAI was in reach, not in cash. Which means this week’s fight was less about favoritism and more about who controls the on-ramp for AI on the iPhone.
Musk is fighting an optics war because he would very much like xAI to have iPhone-grade distribution, and one way to potentially get it is to try to pressure Apple in public.
But unless he can prove systematic bias by Apple, his lawsuit talk is all theater.
That said, if Apple wants fewer fights like this, it should make its App Store ranking process more transparent.
That would be a win for everyone involved in this dust-up.
Regards,
Ian King
Chief Strategist, Banyan Hill Publishing
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