OpenAI delves into hardware as ‘physical AI’ is next critical trend: Kuo

OpenAI’s $6.5B acquisition of Sir Jony Ive’s io will help the Microsoft (NASDAQ:MSFT) and SoftBank (OTCPK:SFTBY)-backed startup develop artificial intelligence-powered devices, with products expected to be revealed as early as 2026.

“AI integrated into real-world applications, often termed ‘physical AI,’ is widely recognized as the next critical trend,” said TF International Securities analyst Ming-Chi Kuo. “While the success of the Jony Ive-OpenAI partnership remains uncertain, it clearly aligns with this trend. This partnership also recalls Alan Kay’s well-known adage: ‘People who are really serious about software should make their own hardware.'”

Ive, a former Apple (AAPL) executive best known for his design work on the iPhone and Mac, is joining OpenAI as part of the deal.

The current prototype for the new device, which will have cameras and microphones for environmental detection but no screen display, is similar in size to an iPod Shuffle, Kuo said. It can be worn around the neck and will likely connect to PCs and smartphones to utilize their display capabilities. Kuo’s industry checks show the device entering mass production in 2027, with assembly and shipping taking place outside of China to reduce political risks.

“In my view, one of OpenAI’s motives for announcing its collaboration with Jony Ive now is likely to shift market focus from recent Google I/O (GOOG)(GOOGL),” Kuo said. “Google’s ecosystem and AI integration, showcased in the I/O keynotes, pose a challenge that OpenAI currently struggles to address. As a result, OpenAI is leveraging a new narrative to redirect attention.”