OpenAI's Hardware Gambit: Can Jony Ive Build the iPhone of AI?

The rise of generative AI has profoundly altered the technology world in recent years, upending how software is created, how people search for information, and how images and videos can be generated — all with a few prompts to a chatbot. What the technology has yet to do, though, is find a preferred form in a physical, everyday gadget. AI largely remains the domain of an app on phones, despite efforts by start-ups and others to move it into devices.

Now, OpenAI is making a massive leap into that physical space. Just this week, OpenAI announced it is paying $6.5 billion to acquire IO, a one-year-old startup co-founded by Jony Ive, the former top Apple executive revered for designing iconic products like the iPhone. This all-stock deal effectively unites Silicon Valley royalty, aiming to usher in what the two men describe as a new family of products for the age of artificial general intelligence (A.G.I.). But can this ambitious union truly produce the next “iPhone of AI” and fundamentally reshape how humanity interacts with technology?

Why Is OpenAI Betting on Hardware?

For years, AI has primarily existed as a software layer, accessed through existing screens and devices. Yet, as OpenAI CEO Sam Altman and Jony Ive articulate, current computing form factors may be limiting AI’s true potential. Altman has conveyed a sense of anticipation for the next big technological breakthrough, suggesting a dissatisfaction with the current smartphone-centric era.

Ive, in turn, has reflected on his own creation, the iPhone, and its unintended consequences, acknowledging responsibility for the anxiety and distractions that come with constant digital connection. Altman has echoed this sentiment, expressing a personal unease with modern technology’s overwhelming nature, describing it as a bombardment of notifications and flashing lights. Their shared vision is to leverage AI to help people make sense of this noise, moving towards “ambient computing.” This concept envisions devices like pendants or glasses that seamlessly process the world in real time, fielding questions and analyzing images and sounds without the need for constant interaction with a screen. A core conviction for them is that AI necessitates new computing form factors to unlock its maximum potential.

Who Is Jony Ive and What Is IO?

Jony Ive is a legendary figure in consumer electronics design, best known as the creative force behind Apple’s most iconic products. As a protégé of Steve Jobs, he designed the iPhone, iPod, MacBook, iPad, and Apple Watch, profoundly shaping the aesthetic and user experience of modern technology. After leaving Apple in 2019, he founded LoveFrom, a design studio that will continue its independent work while also taking on creative and design responsibilities across OpenAI.

IO, the startup being acquired, was founded by Ive last year, alongside Apple alumni Scott Cannon, Evans Hankey (Ive’s successor at Apple until 2023), and Tang Tan (who led iPhone and Apple Watch product design until 2024). The company was formed specifically to conceptualize new hardware products suited to A.I. The $6.5 billion all-stock deal is OpenAI’s biggest acquisition to date and will bring Ive’s team of roughly 55 engineers and researchers directly into OpenAI, reporting to Peter Welinder, a product vice president overseeing the new IO division. OpenAI already owned a 23% stake in IO from an agreement in late 2024, with the latest transaction covering the remaining ownership.

What Could the "iPhone of AI" Look Like?

Ive and Altman have remained tight-lipped about specific product details, indicating that more information will be shared next year. Their rhetoric strongly suggests a departure from traditional device paradigms, with hints pointing towards wearable or seamlessly integrated gadgets such as “pendants or glasses.” The emphasis is on real-time processing and intuitive interaction, aiming to create products that elevate humanity.

The path to a successful AI device, however, is fraught with challenges. The market has already seen high-profile failures from other startups attempting this space. For instance, Humane, a company that launched an AI Pin (and in which Altman had previously invested), folded after its product flopped, with Ive reportedly describing it as a very poor product. Similarly, the Rabbit R1 personal assistant device also received poor reviews. The challenge for OpenAI and Ive will be to learn from these missteps and deliver a truly novel type of product that resonates with consumers.

Can OpenAI Afford This Hardware Gambit?

The $6.5 billion acquisition of IO represents a significant financial commitment for OpenAI, especially as the company itself is currently unprofitable. Building and training cutting-edge AI models, like those powering ChatGPT, are enormously expensive endeavors. OpenAI is under pressure to ramp up revenues, with financial documents reviewed by The New York Times projecting about $3.7 billion in sales this year and about $11.6 billion next year.

This hardware push comes amidst other large investments, such as reported talks to acquire Windsurf, an AI-powered programming tool, for about $3 billion. Furthermore, OpenAI’s substantial $40 billion funding round in March, which valued the company at $300 billion, included a $30 billion investment from SoftBank, contingent on OpenAI restructuring into a for-profit entity by the end of the year. Despite the high costs and financial complexities, Altman has maintained an outward confidence regarding the company’s financial standing, dismissing concerns about its funding. This bold move into hardware underscores OpenAI’s belief that achieving artificial general intelligence requires not just software breakthroughs, but a complete rethinking of how humans will interact with AI in their daily lives.

Reference Shelf

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