Apple's AI Deal with Google Spells Strategic Shift for Tech Giants and OpenAI

Apple Inc. (AAPL) has entered a multi-year agreement with Alphabet's Google (GOOGL) to power its next generation of AI models for the upcoming Siri 2.0 upgrade. The collaboration, announced on January 13, 2026, involves Apple licensing a customized version of Google's Gemini AI models, with an estimated annual cost of $1 billion.

The partnership follows Apple's evaluation of AI models from major players, including OpenAI and Anthropic, with Google's Gemini selected for its performance and cost-effectiveness. The deal marks a significant development in Apple's AI strategy, with plans to integrate the new capabilities into Apple Intelligence and other features.

Evercore ISI has reiterated an Outperform rating on Apple stock and raised its price target to $330, citing the strategic benefits of the collaboration. Analysts note the partnership allows Apple to access advanced AI technology while continuing to develop its in-house models over time.

Why Did This Happen?

Apple's decision to partner with Google comes after repeated delays in launching its AI-powered features. The company has faced criticism for slow progress in AI, including the delayed rollout of updated Siri capabilities. Google, on the other hand, has regained traction with its Gemini models, which have gained praise for their performance and versatility.

The partnership also aligns with Apple's continued focus on user privacy. The updated Siri will operate on Apple devices and the Private Cloud Compute platform, ensuring data remains protected under Apple's stringent privacy standards.

How Did Markets React?

Apple's stock (AAPL) saw a modest 0.3% increase in the days following the announcement. The market is closely watching how the integration of Gemini will impact user adoption and Apple's long-term AI strategy. Analysts from Wedbush and Bank of America have emphasized the potential for Apple to leverage the deal to accelerate its AI growth.

Google, meanwhile, has seen a significant market valuation increase, with its stock price rising 65% in 2025 and pushing its market cap above $4 trillion. The deal further solidifies Google's position in the AI space and reinforces its competitive edge against OpenAI.

What Are Analysts Watching Next?

Investors are now turning attention to how Apple will execute its AI roadmap in 2026. Analysts like Dan Ives from Wedbush and Justin Reimer from Futurum Group have highlighted the importance of this year for Apple to regain momentum in the AI race.

For Google, the deal opens new revenue streams and expands its reach to Apple's vast user base of 1.5 billion iPhone users. This could eventually lead to pre-installed Gemini applications on Apple devices or additional monetization through user activity powered by the model.

OpenAI faces a setback as Apple's shift to Gemini reduces its visibility on Apple's platforms. While Apple has not ruled out future collaboration with OpenAI, the deal with Google signals a shift in the balance of AI distribution. OpenAI's ChatGPT will likely continue to serve more complex, opt-in queries rather than the default AI layer.

The AI apps market is expected to grow at a CAGR of 38.7% through 2030, driven by increased adoption across industries. The Apple-Google deal is a key development in this context, as it reflects broader trends of strategic partnerships in the AI sector.