Tech Brew Ride Home - Mon. 05/19 – How Apple Lost AI

Episode Date: May 19, 2025

The big, long saga of how Apple lost the AI race. Nvidia wants you to bring your own gear. 23andMe’s assets are acquired. Why are Apple and Epic still bickering? And why has kidnapping suddenly become a major issue for big crypto players? Sponsors: AGNTCY.org Qualialife.com/ride and code ride Links: Why Apple Still Hasn’t Cracked AI (Bloomberg) Nvidia Opens AI Ecosystem to Rival Chipmakers in Global Push (Bloomberg) Regeneron to Buy 23andMe Out of Bankruptcy for $256 Million (WSJ) Epic Asks Court to Force Apple to Approve Fortnite on US Store (Bloomberg) Epic asks court to compel Apple to reinstate Fortnite on the App Store (9to5Mac) Venture capital's series progression (Axios) Crypto High-Rollers Go Big on Bodyguards to Deter Kidnappers (Bloomberg) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMean right home from Monday, May 19th, 2025. I'm Brian McCullough today, the big, long saga of how Apple lost the AI race. Invidia wants you to bring your own gear. 23 and me's assets are acquired. Why are Apple an epic still bickering and why has kidnapping suddenly become a major issue for big crypto players? Here's what you miss today in the world of tech. Big Mark Gurman Apple scoop Monday. In fact, in terms of pure word count, this is basically,

the biggest ever. Mark has essentially, what is a long read, looking at Apple's failed AI efforts and why they failed. Basically, it goes like this. In 2018, Apple made a high-profile move by hiring John Giann Andrea, Google's top AI executive to overhaul its scattered artificial intelligence efforts. This is exactly the kind of person we need for AI, Craig Faderigi, Apple's software head told staff at the time. Gianandrea, reporting directly to CEO Tim Cook, was meant to unite and elevate Apple's AI, especially vis-a-vis Siri. But seven years later, that optimism has eroded. Apple's AI has not only failed to catch up, according to Mark's sources, it's arguably fallen further behind. At WWDC-20204, Apple announced Apple Intelligence, promising features like

writing tools, emoji generation, i.e. gem mojis, and an upgraded Siri. Yet, most of these features were significantly delayed. For example, series' promised ability to parse emails and deliver personalized responses was demoed in videos, but failed in real-world beta testing. The feature rollout was postponed repeatedly, now set for beyond WWDC 2025. And I would argue that even those features are so far behind what other AI chatbots can do, this is sort of meaningless for consumers. Inside Apple, the failures sting, apparently. This is a crisis, one senior AIT member told German. Another said, quote, it's been sinking for a long time. In addition to being behind in features, according to internal metrics, Apple's models remain

years behind rivals in terms of accuracy and usability. Apparently, the central issue was Apple's fragmented AI strategy. Gianendra tried to simplify series-blooded codebase and kill unused features, but his efforts were often blocked. Federigi and others prioritized polishing Apple's annual iOS updates over risky AI bets. Craig is just not the kind of guy who says, hey, we need to do this big thing that will require big budgets, a former executive tells German. Apple also underinvested in the GPU's critical for training large language models. Luca Mastery's conservative approach meant Apple couldn't match the scale of AI development seen at Amazon or Microsoft. One AI engineer is quoted as saying, you can't magically summon more

GPUs when the competitors have already snapped them all up. Complicating matters. Apple's privacy-centric approach hampered its ability to collect training data, as we've long speculated. It's web crawler Applebot honors opt-out requests that rival bots ignore, and the company restricts AI researchers' access to user data. Instead, Apple has leaned on synthetable. synthetic data, manufactured data sets, and manual human review to evaluate AI performance. After repeated failures, Gian Andrea was stripped of Siri and product development responsibilities in spring of this year. Siri is now led by Mike Rockwell, creator of Apple's Vision Pro headset, who reports to Federigi. Gian Andrea retains control over core AI search and

infrastructure, but has been sidelined from user-facing products. Gian Andrea's perceived caution has sparked debate inside Apple, while he believed users want AI to control devices rather than act like a chatbot, others argue Apple's conservatism has cost it valuable time. JG should have been much, much more aggressive in getting funding to go big, said one employee. Another said bluntly, they just don't execute. Series' current problems are apparently deeply technical. Apple attempted to merge new AI-driven code within Legacy Siri infrastructure, a stopgap that created integration bugs. There are hundreds of bugs right now, a Siri engineer said, it's whack-a-mole.

Internally, morale is apparently low. Team members describe confusion, lack of direction, and resentment between teams. Even free meal vouchers given to AI engineers sparked backlash. They shipped a year after everyone else and still got free lunch. One employee joked. Despite the dysfunction, Mark says Apple has made incremental progress. It is integrated chat GPT into Siri and features like writing tools and email summaries have launched, albeit powered by OpenAI's models. Rockwell is reorganizing the Siri team to improve performance speech. and voice interaction. Meanwhile, Apple is exploring deeper third-party AI partnerships, including with Google's Gemini, Anthropic, and Perplexity. The goal? Supplement Siri and Safari search

with LLMs as usage shifts from traditional web search to conversational AI. Apple's Safari search deal with Google worth $20 billion annually is under antitrust scrutiny, adding urgency to these efforts. Apple is also building a next-generation Siri codenamed LLM Siri entirely powered by a new large-language model. Offices in Zurich are leading this effort. and a massive review team across the globe is grading AI outputs for accuracy. Dag Kit Loss, the original creator of Siri, remains optimistic. Quote, they still have the button, the brand, and if they do a brain transplant for Siri,

they have every opportunity to take over as the assistant of choice. Heading into WWDC 2025, Apple plans to focus on polishing Apple intelligence, introducing a battery management AI mode and virtual health coach. However, no major Siri revamp is expected until later in the year. internally, Apple may rebrand its AI work to distance it from series faltering image. In Tim Cook's own words, quote, it's just taking a bit longer than we thought, end quote. But that's the problem, right?

NVIDIA has unveiled NVLink Fusion, which lets clients use NVLINK to couple non-NNVDIA CPUs or accelerators with Nvidia's GPUs in their rec-scale setups to boost AI development. Quoting Bloomberg. To date, Nvidia has only offered complete computer systems built with its own components. This opening up gives data center customers more flexibility and allows a measure of competition while still keeping NVIDIA technology at the center. NVLink Fusion products will give customers the option to use their own central processing units with NVIDIA's AI chips or twin

NVIDIA silicon with another company's AI accelerator. It gives an opportunity for hyperscalers to build custom silicon with NVLink built in. Whether they do or not will depend on if the hyperscaler believes NVIDIA will be here forever and be the keystone, says Ian Kutcher, chief analyst at research firm more than more. I can see others shun it so they don't fall into the Nvidia ecosystem any harder than they have to, he said. Invidia CEO Jensen Wong opened Computex with an update on timing for Nvidia's next generation GB300 systems, which he said are coming in the third quarter of this year. They'll mark an upgrade to the current top of the line, Grace Blackwell systems, which are now being installed by cloud service providers. At Computex, Wong also introduced a new

RTX Pro server system, which he said offered four times better performance than NVIDIA's former flagship H-100 AI system with deep-seek workloads. The RTX Pro server is also 1.7 times as good with some of META's Lama model jobs. That new product is in volume production now, Wong said, end quote. Follow-up story here. Regeneron Pharmaceutical says it will acquire 23 Enmese assets, including its personal genome service for $256 million in the bankruptcy auction. quoting the journal. All of 23MEs consumer genome services are to continue uninterrupted,

Regeneron said the acquisition is expected to close in the third quarter. The sale gives Regeneron a virtually unprecedented repository of human genetic information that has been building since 23 and Me's DNA testing kits made a big splash with customers years ago. Regeneron said, it is prepared to tell a court-appointed ombudsman what it plans to do with 23MEs consumer data and detail the privacy programs and security controls in place for it. The company said it would remain compliant with 23&Me's consumer privacy policies and applicable laws related to the treatment of customer data. We assure 23&Me customers that we are committed to protecting the 23 and me data data data data data, security, and ethical oversight, and will advance its full potential

to improve human health, said Eris Barras, a senior vice president at Regeneron. 23 and me went public in 2021 and briefly saw its valuation top $6 billion but tumbled into bankruptcy in March after years of profitability struggles. After the company filed for Chapter 11, protections. California Attorney General Rob Bonta put out a statement warning constituents to have their genetic information deleted from 23MEs database and to have any samples of genetic material held by the company destroyed, end quote. Apple and Epic are still tussling, which I find kind of weird. Apple has filed a new motion asking a U.S. District judge to order Apple to approve Fortnite on the U.S. App Store, calling Apple's continued refusal contempt of court. For its part, Apple denies removing Fortnite

from alternative marketplaces in the EU and says it asked Epic Sweden to resubmit its app update excluding the U.S. App Store. Quoting 9 to 5 Mac. Back in the very first hearing of this case, Judge Rogers said she was, quote, inclined not to require Apple to allow Fortnite on the app store. A few months later, she denied Epic's request for a preliminary injunction, effectively allowing Apple to continue banning the game. That matters now because Epic's new motion asked the judge to go a step further and order Apple to greenlight Fortnite anyway. To grant that, she would likely have to conclude that Apple's continued refusal has crossed the line into contempt of court, despite her earlier statement that Apple wasn't obligated to host the game. Epic's requests may be bolstered by Judge Rogers' recent

order demanding Apple comply with the court's 2021 injunction in the days since Epic has tried to pressure Apple by live-tweeting the ongoing stalemate over the new app submission. But with that approach, seemingly going nowhere, this new legal strategy may be Epic's way of pressing its luck a little further, end quote. And quoting Bloomberg. And Apple spokesperson said that the company did not take any action to remove the live version of Fortnite from alternative distribution marketplaces in the EU. Apple said it asked the game company's European division, Epic Sweden, to, quote, resubmit the app update without including the U.S. storefront of the App Store, so as not to impact Fortnite and other geographies. Epic Games said it submitted Fortnite to the U.S.

App Store last week, aiming to return it to U.S. iPhone users for the first time in three years. move followed a judge ruling that Apple must allow third-party apps to steer users to the web to complete in-app purchases without taking a commission. Apple didn't comment on if it would allow Fortnite back into the U.S. store. Apple's refusal to consider Epic's fortnight submission is Apple's latest attempt to circumvent the injunction and the court's authority, Epic said in the court filing. Epic therefore seeks an order enforcing the injunction, finding Apple in civil contempt yet again, and requiring Apple to promptly accept any compliant Epic app, including Fortnite for distribution on the U.S. storefront of the U.

app store, end quote. According to Carter, VC deals are stalling at the seed round with series A deal count following by 79% between Q1 of 2022 and Q1 of this year. 46% of seed deals were bridge rounds in Q1 of this year, so not moving on to series A. I'm telling you this for you founders out there to be aware. While in the downturn of VC of the previous two years, the big logjam of NGAM of New rounds was getting from A to B or C, the ton of zombie unicorns and stuff like that. At that point, the ability to raise big seed rounds was continuing.

The earlier rounds were where the action was. But now the problem of moving on to the next round has moved down the latter, so to speak. Seed is now where people are currently getting stuck. I see it in my own portfolio. Quoting Axios. One interpretation of this is that market volatility is having downstream impacts with startups delaying new priced rounds until they have more valuation certainty. Another is that this is less about supply than demand, or the so-called Series A crunch. Most of that is driven by post-2020 VC

fundraising difficulties, save for a small number of successful firms who've raised large funds that encourage later stage checkwriting. Series A deal count fell 79% between Q1 of 2022 and Q1 of this year per carda. Startups staying in seed can alter return on investment expectations up the stack, assuming that they eventually graduate to later rounds. That's not necessarily a problem for founders or early employees, but definitely changes the math for LPs investing in Series A or Series B-focused funds. Other card of findings, media founder dilution fell from Seed Stage through Series D, while the median time between Series A and Series B rounds hit an all-time high of 2.8 years, end quote.

Finally today, I wanted to talk about something we mentioned obliquely last week, and that is the recent wave of kidnappings in the crypto industry, which has led to more conference security, bodyguards, armored vehicles, social media monitoring, and more. Quoting Bloomberg. Even before Coinbase disclosed that hackers had stolen the home addresses and account balances of its customers, Jethro Peelman was seeing an uptick in interest from concerned clients with large crypto holdings who were looking for bodyguards and other forms of protection. Peelman works for an Amsterdam-based firm that provides physical security and intelligence services to cryptocurrency holders who have become worried about the wave of kidnappings

that have hit the industry, the most recent of which occurred last week when assailants tried to abduct the daughter and grandson of a French cryptocurrency executive. We've had more inquiries, more long-term clients, and more proactive requests from crypto investors who don't want to be caught off guard, said Peelman, a managing director at Infinite Risks International. They're realizing that intelligent security measures are part of the cost of doing business at this level, unquote. People with crypto wealth face unique physical risk because public blockchain networks like Bitcoin and Ethereum allow tokens to be transferred instantly and anonymously. This means that if an individual is coerced into giving up their access credentials to their

holdings, their assets can vanish within seconds with little chance of recovery. Conversely, in traditional financial services, bank accounts can be frozen or seized by law enforcement, allowing more chances to get back lost money. The concerns about physical safety have come to the fore after the Coinbase attack because the hackers who penetrated the cryptocurrency exchange gained access to data that could allow them to identify and track down customers with large holdings, a frightening prospect just a few days after the kidnapping attempt in France. Cryptotrators are acutely concerned about their privacy during data leaks, said Ranghui Gou,

co-founder of blockchain security firm Sarah K, an associate professor of computer science at Columbia University. Cryptocurrency can be transferred with just a private key and is extremely difficult to recover, he added. This makes crypto traders prime targets for criminals. The industry's massive investments in protecting online systems may even be fueling the offline risks. Rapid crypto innovation has meant cracking cyber defenses has become so challenging that adversaries are resorting to physical attacks, according to Charles Marino, CEO of the security firm Sentinel, which provides intelligence reports about ongoing threats in the crypto industry. Right now, the crypto threat landscape is very high, he said. The elevated concerns around the safety of crypto executives and their loved ones are illustrated by the amount of money that Coinbase spends to protect its own chief executive officer, Brian Armstrong.

The company spent $6.2 million in personal security costs for Armstrong last year, and April regulatory filing that detailed executive compensation. That's more than the combined amount that J.P. Morgan, Chase, Goldman Sachs, and NVIDIA spent on their respective CEOs' similar filings showed. In an attempted kidnapping in Paris last week, criminals targeted family members of the CEO of Paymium, a French crypto exchange. While that attempt was foiled, it was only the latest in a string of similar attacks. David Balland, a co-founder of French Crypto Wallet startup Ledger S.A.S. was left with mutilated hands after he and his partner were kidnapped in January. The attacks have escalated enough that France's interior minister Bruno Ritali

on Friday promised to establish a priority emergency police number for the industry. Elite French police units will also offer special briefings and security checkups for crypto executives and their families. On social media, the kidnappings and recent Coinbase attacks have led traders to say they're avoiding trips to France anytime soon. ETHCC, an annual crypto conference in Khan, has increased security. measures for this summer's gathering, according to a spokesman for the event. This has included coordinating with multiple branches of French law enforcement, special forces, and private security

firms, they said, rather than just local police, as had been done in previous years. These issues, though, have not been confined just to France. One Bitcoin security expert, Jameson Lop, keeps a running public database of physical attacks on cryptocurrency holders. It documents more than 20 incidents around the world this year alone, end quote. Nothing more for you today. Talk to you tomorrow.