OpenAI's $6.5 Billion Acquisition of io! Teaming Up with Jony Ive to Enter the Hardware Space—Is Apple at a Turning Point?

TradingKey - OpenAI announced on Wednesday that it will acquire io Products, an AI device startup co-founded by former Apple design chief Jony Ive, in an all-stock transaction valued at nearly $6.5 billion. This marks OpenAI’s largest acquisition to date, underscoring CEO Sam Altman’s commitment to entering the hardware sector.

Founded by Jony Ive and several former Apple employees, io will provide OpenAI with a dedicated division for developing AI devices, supported by Apple veterans who contributed to iconic products such as the iPhone. OpenAI had already acquired a 23% stake in io in the fourth quarter of last year, and is now set to pay the remaining $5 billion to complete the acquisition, expected to close this summer.

Sam Altman revealed that OpenAI plans to create an unprecedented consumer hardware product. While he shared some details, he clarified that the device will not be a phone or glasses. It will be capable of fully sensing its environment and everyday life, and can be placed either in a pocket or on a desk, serving as a third core device alongside the MacBook Pro and iPhone. Altman aims to launch this product by the end of 2026, stating that a prototype has already been developed.

For Apple, Jony Ive’s move to a perceived rival may be an ominous sign, particularly as the company struggles with its AI initiatives. Reports suggest that Apple is unlikely to unveil a new version of Siri at next month’s WWDC (Worldwide Developers Conference), and the Apple Intelligence showcased at last year’s conference fell short of expectations, marking a temporary setback for Apple’s AI strategy.

Veteran Apple analyst Gene Munster noted that technological revolutions like the internet, smartphones, and AI occur once in a generation, and OpenAI is catalyzing this transformation into reality. Apple’s services chief Eddy Cue also believes that AI devices could potentially replace the iPhone within a decade. The consensus in Silicon Valley is increasingly that AI products may revolutionize the world of electronics.

On Wednesday, the market reacted negatively to the news, with Apple shares closing down 2.4%, and year-to-date, the stock has fallen approximately 19%.