Apple’s Go-Slow A.I. Approach

A.I., the Apple way

After months of anticipation, Apple finally introduced its plan to infuse its products with artificial intelligence: Meet Apple Intelligence, which weaves the technology into core features of iPhones, iPads and Macs.

But while the tech giant announced a slew of new features, the announcement reflected a very Apple-like cautious approach to A.I. Yes, the company will add OpenAI’s ChatGPT to Siri — but it’s leaving the door open for adding other chatbots.

It all suggests that Apple is hedging its bets (or is simply behind its rivals), while slowly ramping up what A.I. will do for users.

OpenAI got its turn in the spotlight, as the only A.I. services provider name-checked at the Worldwide Developers Conference on Monday. iPhone users will be able to direct queries to the latest version of ChatGPT if Siri can’t handle them on its own.

Sam Altman, OpenAI’s C.E.O., was at Monday’s event, but didn’t speak. He did post on X: “very happy to be partnering with apple to integrate chatgpt into their devices later this year! think you will really like it.”

But the partnership appears more limited than predicted:

• ChatGPT will potentially get millions of new users — but it won’t store those queries, meaning that they can’t be used for training OpenAI’s models, and users’ internet addresses will be obscured.

• Apple isn’t charging users extra for accessing ChatGPT. Our questions: Who is footing the bill, and how large is it?

• And Craig Federighi, the iPhone maker’s software chief, said that the company would eventually bring in other A.I. models, probably including Google’s Gemini. That means OpenAI isn’t getting the kind of exclusive partnership that Google has as the default provider of search on iOS.

It does suggest that Elon Musk’s fulminations about OpenAI being tightly integrated with iOS — he has threatened to ban Apple devices from his companies if that happens — may be overblown.

Still, Apple is laying the groundwork for more disruption. For now, many of its new A.I. features are relatively small-scale, such as proofreading emails, automatically generated transcripts of phone calls and Google-esque photo manipulation.

Many A.I. requests will be handled locally by a user’s device, but more complex requests will be farmed out to Private Cloud Compute, Apple-run cloud servers that run on the company’s own processors (rather than chips from Nvidia, whose business has soared amid high demand from A.I. companies).

And Apple is promising that A.I. will be able to handle more user requests, potentially making a slew of apps obsolete. Pundits have already been speculating about which companies’ days are numbered.

Apple’s shares fell 2 percent Monday, denying the company the sort of boost that A.I. news has given to the likes of Microsoft and Nvidia. That said, the stock tends to fall after the conference, and some commentators said the news may bolster iPhone sales.

• In other A.I. news: OpenAI hired Sarah Friar, the former C.E.O. of the social network Nextdoor, as C.F.O., and Kevin Weil, a onetime top executive at Twitter, as chief product officer.

HERE’S WHAT’S HAPPENING

Edgar Bronfman Jr. reportedly weighs an offer for Paramount. The former head of Warner Music, who is said to have backing from Bain Capital, is considering a bid of up to $2.5 billion for National Amusements, the holding company that controls the entertainment giant, The Wall Street Journal reports. As DealBook reported on Monday, talks over a potential deal between Shari Redstone, the head of National Amusements, and Skydance Media appear to be making progress.

A major California public pension fund will oppose Elon Musk’s pay package. Calstrs said it would vote against a shareholder measure to reinstate the Tesla chief’s multibillion-dollar compensation plan. That makes it the latest large institutional investor to reject the package ahead of Tesla’s annual meeting on Thursday.

The Port of Baltimore’s main shipping lane has fully reopened. The restoration of the channel comes nearly 11 weeks after the collapse of the Francis Scott Key Bridge following a ship collision, which snarled ship traffic into the vital East Coast shipping hub and forced delays and rerouting. Federal and state officials have vowed to rebuild the bridge, which could cost almost $2 billion.

Moelis & Company puts a top banker on leave as it investigates a video. A spokesman for the investment bank said that Jonathan Kaye, a managing director, was the man in a video who appeared to punch a woman on a Brooklyn street. The video caused an uproar on social media and spread widely online. The Financial Times reports that while the New York Police Department was aware of the episode, no complaints have been filed.

The markets brace for a double whammy

Investors face a one-two punch on Wednesday: inflation data and, hours later, a Fed decision on interest rates.

Wall Street is already warning of potentially choppy trading as the S&P 500 and the tech-heavy Nasdaq Composite notch record after record despite signs of solid, but slowing economic growth and sticky inflation.

Consumer Price Index data for May is out Wednesday at 8:30 a.m. Eastern. Here’s what economists are forecasting:

• Core C.P.I., which strips out volatile food and fuel prices, rose by 0.3 percent on a monthly basis. That would be in line with April, and an improvement on the first quarter readings, when inflation unexpectedly spiked.

• On an annual basis, core C.P.I. edged up by 3.5 percent, an improvement on April’s 3.6 percent, but still well above the Fed’s 2 percent target.

• Goods inflation — the prices on things like appliances and cars — eased again. But so-called shelter inflation, which includes rents and housing costs, is an area that’s perplexing economists and frustrating homeowners. A decline in shelter inflation “is the key piece of the inflation puzzle,” Michael Reid, an economist at RBC Capital Markets, wrote on Monday in a research note, “and long-awaited progress on that front is likely a prerequisite for the Fed to start cutting.”

It will also be decision day for the Fed. The central bank has been in a holding pattern since July, leaving borrowing costs at a 23-year high. That higher-for-longer stance is expected to continue even as central bankers elsewhere, including at the European Central Bank, have started easing lending rates.

Traders this morning were penciling in just one Fed rate cut this year. But a hot C.P.I. number on Wednesday could scramble that outlook, and put pressure on stocks and bonds.

Watch the Fed’s dot plot. Each quarter, the central bank releases new projections for interest rates. David Mericle, a Goldman Sachs economist, expects Wednesday’s update to call for two rate cuts this year, down from three in March.

Goldman is among the more dovish Fed watchers. Its economists expect a total of eight rate cuts over the next 2.5 years (the first coming in September) to bring the prime lending rate down to 3.25 percent to 3.5 percent, two percentage points below today’s rate.

Warning: Analysts have torn up their forecasts time and again this year. In January, Wall Street saw inflation cooling enough to warrant as many as seven rate cuts. Hotter-than-expected inflation and jobs data though have forced economists to dial back those calls, with some, including Apollo Global Management’s Torsten Slok, seeing no cuts at all this year.

Wednesday’s figures could go a long way toward settling the debate.

“Would you want me to be in charge of putting the nation on a more moral path? That’s for people we elect. That’s not for lawyers.”

— Chief Justice John Roberts, pushing back against an activist’s suggestion about the Supreme Court. The comments were revealed in a secret recording from a charity event in which Justice Samuel Alito agreed with a comment by the activist that U.S. should return to a place of “godliness.”

Who will take over the F.D.I.C.?

The White House is close to nominating Christy Goldsmith Romero, a derivatives regulator, to replace Martin Gruenberg as head of the embattled Federal Deposit Insurance Corporation, The Wall Street Journal reports.

Goldsmith Romero is a Democratic member of the Commodity Futures Trading Commission. She has emerged as a front-runner to take over the bank watchdog that has been rocked by findings of a toxic workplace culture. Other potential candidates include Sandra Thompson, director of the Federal Housing Finance Agency, and Kristin Johnson, another C.F.T.C. commissioner, according to The Journal.

Goldsmith Romero has a record as a manager and reformer. Before joining the F.D.I.C. in 2022, she was a special inspector general at the Troubled Asset Relief Program at the Treasury Department. Goldsmith Romero has been confirmed for roles by the Senate on two occasions. President Biden hasn’t made a final decision on whom to nominate, The Journal adds.

Goldsmith Romero would be tasked with cleaning up the F. D. I. C. This year, a Journal investigation found widespread sexual harassment and misconduct, behavior that was confirmed by an external law firm in a separate review.

Democrats initially backed Gruenberg to stay on the job. But the mood music changed when Senator Sherrod Brown, Democrat of Ohio and the head of the Senate Banking Committee, called for new leadership once a successor had been confirmed.

Any confirmation process would need to move fast. Brown’s proviso on succession means that the full Senate would need to act before the November election.

It also avoids a scenario whereby Travis Hill, the vice chairman of the F.D.I.C., a Republican, would temporarily take over at the agency.

THE SPEED READ

Deals

• Elliott Investment Management officially called for changes at Southwest Airlines, blaming the airline’s chairman and C.E.O. for its struggles; Southwest said it would engage with the activist hedge fund. (Elliott, Southwest)

• An investment firm tied to Jeffery Hildebrand, a billionaire oil executive who is supporting Donald Trump, is reportedly a bidder for Vista Outdoor’s ammunition division. (FT)

• Mistral, a French artificial intelligence start-up, has reportedly raised 600 million euros (about $645 million) in new capital at a €5.8 billion valuation. (Sifted)

Elections, politics and policy

• Sean O’Brien, the president of the International Brotherhood of Teamsters, has asked for speaking slots at both the Democratic and Republican presidential conventions, reflecting both parties’ efforts to court unions. (NYT)

• California plans to use a new consumer protection law to try to seize some profits from the world’s largest oil companies. (FT)

• “Trump Floats Tax-Free Tips for Workers. That Could Mean More Tipping for Customers.” (WSJ)

Best of the rest

• The oil giant BP is requiring more disclosure about work relationships, after Bernard Looney’s departure as C.E.O. last year after he failed to be fully transparent on the matter. (WSJ)

• A court-appointed monitor overseeing the United Automobile Workers’ operations is investigating a dispute between Shawn Fain, the union’s president, and two officials who say they were improperly stripped of duties. (NYT)

• “‘Anti-Woke’ Shareholders Are Going After Corporate Boards” (WSJ)

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