It's Official: Apple and Alphabet Are Teaming Up for an AI-Powered Siri. Why This Is a Win for Both Companies.

Apple (NASDAQ: AAPL) has big plans for AI (artificial intelligence) -- bigger than itself. It is bringing Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) Gemini models into the next generation of Siri. The two tech companies announced a multi-year collaboration on Jan. 12, which will lead to a "more personalized Siri coming this year."

The collaboration is telling. It shows Apple is willing to partner -- even with a longtime rival -- to move faster on the features for its devices. And for Alphabet, it is a rare chance to put Gemini at the center of everyday consumer behavior, not just inside of its own Google apps and services.

Here's a closer look at why this looks like a win for both companies.

Image source: Getty Images.

What Apple gets from Gemini

In a joint statement on Monday, the two tech giants announced that the next generation of Apple Foundation Models will be based on Alphabet's Gemini models and its cloud technology. This means Apple is using Google's Gemini AI as a core engine behind future Apple Intelligence features, including the Siri revamp.

The most important line in the statement was Apple's own justification: "Apple determined that Google's AI technology provides the most capable foundation for Apple Foundation Models," the press release read. In other words, Apple believes Gemini is the best path to improving Apple's AI features across its devices.

Crucially, Apple is also trying to protect one aspect of its brand that it prides itself on: privacy and security. The statement says Apple Intelligence will continue to run on Apple devices and on Private Cloud Compute. Private Cloud Compute is Apple's approach to handling more complex AI tasks in the cloud while maintaining tight controls over privacy and data access.

Of course, a smarter Siri is not just a nice feature. It will make Apple's overall ecosystem of hardware, software, and services more useful -- hopefully leading to more device upgrades and likely helping fuel its high-margin services business, which has become increasingly important to the tech giant.

What Alphabet gets from Siri

For Alphabet, this is a distribution and credibility win at the same time. Gemini will not be limited to people who choose to interact with it through Google apps but will instead be built into Apple devices by default. With an installed base of active devices of more than 2.2 billion, the partnership gives Gemini a massive audience, and it should help the company maintain its impressive momentum in AI. And Apple's decision to use Gemini over other models is a testament to its capabilities.

Of course, we already know that these types of partnerships between Alphabet and Apple work. Google has been the default search engine for iPhone since the first iPhone was launched, and it was even the default search engine for Mac before that. The partnership has likely been key to both the iPhone user experience and to Alphabet maintaining a dominant market position in search. The two companies are likely hoping for similar benefits with this AI partnership.

The drawbacks

While I believe the deal is a win-win overall for both companies, there are drawbacks as well. For Alphabet, this may only add to the heavy spending the company has committed to supporting its AI ambitions. In its most recent earnings call, Alphabet said it expected 2025 capital expenditures of $91 billion to $93 billion and a significant increase in capital expenditures next year. It turns out that AI-capable cloud computing is extremely capital-intensive.

Meanwhile, Apple is tying a core user experience to an outside AI provider, which could limit its ability to differentiate its products.

Overall, the deal looks good for both companies. It provides Apple with a rapid roadmap to a powerful Siri and an enhanced Apple Intelligence experience, allowing it to focus its attention on areas of its user experience where it believes it excels. Alphabet, of course, gains wider distribution for Gemini and a vote of confidence from one of the world's most important tech companies.

Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.