• Apple, Snap could be incentivised to make partnership, acquisition choices
• ServiceNow, Salesforce and Workday expected to continue to acquire innovation
• Vertical integration provides opportunities across voice recognition, chips and energy management

A wave of disruptive M&A is soon likely to crest, as tech giants race to evolve to artificial intelligence-enabled mobile devices from traditional multi-touch keypad technology offerings, dealmakers said.

There is perhaps a little irony in the dynamics of the AI revolution in that its innovations, particularly in the field of mobile devices, could cause some of today’s tech titans to suffer the same fate of the industry predecessors they themselves once disrupted: irrelevance or even extinction.

OpenAI’s USD 6.4bn acquisition of former Apple designer Jony Ive’s ioProducts underlines the chasm faced by traditional tech titans as they must shift from profitable business models based on multi-touch pad technologies towards natural language interfaces.

Given ioProduct’s focus on hardware development, questions even arise over whether phones will remain society’s main devices for communication, dealmakers noted.

“We will see a lot more disruptive M&A in the future of small talented teams that could change the landscape of how we communicate or manage energy,” said Ragnar Meitern, senior advisor at FTI Capital Advisors.

The OpenAI deal for ioProducts is creating a buzz in the AI world, with experts and dealmakers weighing the impact of a potential OpenAI device made by Ive, a man with plenty of industry alliances that could be crystalised further and present opportunities for even more M&A.

With AI giants like Open AI, and Elon Musk’x xAI, designing front-end interface AI agents, dealmakers suggest the beginning of a race for incumbents like Microsoft, Apple, Amazon, Alphabet, Meta and Snap to acquire startups with key design capabilities to move faster towards AI interfaces.

One banker noted that some seasoned incumbent players, such as ServiceNow, Salesforce or Workday, could continue to acquire innovation through AI capabilities. However, huge target multiples are difficult to surpass given the dilutive nature of such buys to their own shareholders, whereas OpenAI, as a private company that already has a huge multiple, is able to acquire more easily.

“The numbers are eye opening – USD 6.4bn. I don’t think there’s any revenue. It’s difficult for others to do,” this banker said.

Google’s recent swoop for Wiz, had already triggered speculation that an improved regulatory landscape in Washington DC for the tech giants could help encourage acquisitive animal spirits across the tech industry after previously being stifled by a prohibitive regulatory clearance process.

Wiz, with its largest ever reverse break fee of USD 3.2bn, sparked hopes that this magnitude of transaction means larger deals might be easier to complete under a more laissez-faire Trump administration antitrust regime.

“M&A banks are pitching everything as a consequence of the Wiz/Google deal. To me, the interest is how the regulatory framework has hurt innovation, as opposed to large cap dealmaking,” ARK Investment Management’s Chief Futurist Brett Winton said.

As the industry battles with a new frontier of technology, the next generation of tech giants has emerged. The incumbents must battle with managing resources between maintaining existing profitable businesses and investment in developing new AI-based models.

Those who delay this shift in resources could fall behind quickly.

“We’re going to see more M&A in the AI space, it’s moving very fast,” said the first banker.

Apple’s Nokia moment?

For existing mobile device leaders, the creation of an AI-powered alternative could be an extinction moment.

“AI is likely to obviate the need to use multi-touch keypad technology,” Winton said, comparing the upcoming shift to natural language interfaces as being akin to the shift from keyboards to mouse technology.

“Within AI, the incumbents all have issues. For Apple, the delay of Apple intel is the dawn of an innovator’s dilemma. This is the market in which they are losing. They will have to move extremely fast to catch up with the innovation series,” Winton said.

“While for Google, the whole premise of its existence, search, is at risk,” he added, noting the pressure from the ability to conduct more complex searches on AI interfaces. Google parent Alphabet’s shares dropped almost 8% on 7 May after Apple executive Eddy Cue testified that Google search traffic had dropped on Apple devices for the first time in over two decades.

Apple recently overhauled its AI leadership, moving development of its AI virtual assistant Siri to Mike Rockwell, vice president in charge of the Vision Products Group, and away from AI head John Giannandrea.

Winton speculated that this move would push Siri downstream, away from Apple’s core multi-touch keypad technology business.  On top of that, the rapid pace of AI growth, means development times are compressed, a four-month delay in development is the equivalent of a two-year delay today, Winton said.

“Is this Apple’s Nokia moment?” one of the advisors questioned.

Art Hogan, chief market strategist at B. Riley Financial, took a different stance. He pointed out that the positive news for Apple is it does not have to be an inventor of AI.

“Apple has the form factor and the install base. It doesn’t have to spend billions on Nvidia chips,” Hogan said. “You have to think about who are Apple’s natural partners and what they eventually do with AI on their platform, which is largely connected through their phones, tablets and computers.”

Given that OpenAI’s new partnership will likely make it a device competitor, Hogan suggested Apple may partner with other AI providers, such as Alibaba in China and Alphabet’s Gemini in the US.

However, for incumbents the regulatory path may still throw up challenges. As reported by this news service, diversity, equity and inclusion programs are now in the crosshairs of the Trump administration, and could be featured in merger agreements. For Apple, this may present a new dilemma, given 97% of its shareholders voted against anti-DEI measures earlier this year.

A third banker said OpenAI’s branching into hardware is interesting from two perspectives: user experience and data harvesting. It’s not just about how does the user interact with AI but also how does AI interact with the world to collect more information.

Apple and Alphabet did not respond to requests for comment.

The next revolution

Ambient computing and ambient AI are key areas for disruption, the third banker said.

With a revolutionary OpenAI device potentially on the horizon, Snap should absolutely be inspired to do something, the banker said, noting that Snap has been “laser focused” on augmented reality, a form of ambient computing.

Snap has been putting more focus on its AI chatbot on its interface, which is powered by ChatGPT and Gemini.  “I think this will inspire them to make their own AI-related M&A move,” this banker said.

Hogan questioned how this AI revolution will impact Amazon given that it is unlikely to pursue a device given the dwindling consumer appetite for Kindles.

“Amazon’s focus is much more around how to improve its web services and how AI makes them more productive,” he said. “It is in ad revenue and entertainment now, so I don’t think this affects its core competency.”

Of all the tech giants, Microsoft is the most likely beneficiary with its percentage of ownership in OpenAI, said Hogan. “This deal should speed up adoption, which is good for OpenAI and Microsoft.”

While there is frustration that startup deals are struck privately, the AI ecosystem presents a huge opportunity for dealmakers in areas such as data centres, as energy management needs accelerate, the first banker said.

The shift to AI interfaces brings with it momentum towards vertical integration, which need AI capabilities at each layer of the stack, as well as improved security, the dealmakers said.

Companies with voice recognition technologies to assist with tasks from customer service to doorbells or AI speakers could be targeted, they said.

Google, Amazon or Anthropic, through its AI interface Claude, which now powers Amazon’s virtual assistant Alexa, all have these capabilities.

In a market where early innovators will be rewarded, these tech-disruptors turned industry incumbents must move fast to avoid the fate of their predecessors.